Wednesday, July 7, 2010

Keeping a Business New and Refreshed

Keeping a Business New and Refreshed

Do you know what a GI party is? Well, if you do, then you know you do not want to be invited to one. This is an activity that the enlisted Army goes through in preparation for inspections. Each soldier cleans their living quarters from top to bottom eliminating any errant dust particle with an arsenal of cleaning equipment. When the party is over, there is not a spot left to clean. There is a reason for this activity, and it does have something to do with people in any type of business.
            These GI parties have a discipline training aspect to them. They get the soldier used to taking care of things, paying attention to small details, and following orders of the soldier supervising the cleaning. The reward is self esteem and satisfaction when the job is well done. The other aspect of this activity relates more to the jewelry industry. This activity keeps old buildings looking fairly new. Even the old Quonset huts looked great with the newly waxed floors. The very old barracks continue to look livable due to this activity.
            Now take a look at your store, office, or other place of business. How does it look to the customer or potential customer? Run your hand on top of the door, picture frames, and other surfaces. Is it clean? Are there things that are yellowed that used to be white and things that are washed out that used to be colorful? What happens is that you see the place everyday so the change is so gradual that it goes unnoticed.
            The challenge is to look at your business like it was your first time to see it. For most people, this will be a jaw dropping experience. The second part of the challenge is to roll up your sleeves and start cleaning. Get rid of all outdated posters, discolored fixtures, and even your outdated inventory. If you still have nugget rings from the 1980s, melt them down into something new or sell the gold. Once you have your “party,” take a look around once again. If you can see the difference, your customers will as well.
            Everyone knows a loaf of moldy bread is undesirable and a fresh loaf attacks the senses in a opposite way. The same holds true with your business. Keep the look fresh and new. Assail the customer’s senses in a way that will entice purchases. Just think; a little elbow grease could result in increased revenue. What a great return on investment!

Tuesday, July 6, 2010

Managerial Finance "Little Things Do Matter"

Managerial Finance
Little Things Do Matter

     Managerial finance functions should be performed continuously. There are many things that are overlooked during the expansion or contraction of a business. It is of course best to start with the larger, more meaningful tasks, and then start paying attention to the smaller things that will bring efficiency and cost savings to the organization. Here is a case in point.

     A grocery retailer here in Honolulu has grown from a small mom and pop convenience store to a three store, one warehouse specialty retailer. Shipments arrive daily at the warehouse and then the goods are distributed to their respective stores as needed. The overall business performs well. There is more growth planned, but in the meantime, there is some fine tuning that can be done.

     Let us face it; we all overlook a lot of things. As things change, habits of old seem normal and do not appear to be a problem. This three store enterprise has always had their mail delivered to the oldest store and then picked up by the warehouse worker and taken back to the warehouse office. This makes sense since the warehouse office is where all of the billing, ordering, and accounting is performed. I am sure that you have already figured it out, but this has been a habit built into the system over many years. You would think that a simple address change to the warehouse location would have been done a long time ago. You may be wondering what this is costing the company.

     It may not seem like a lot, but the office worker does have to walk across the street to the store to get the mail. Of course, like anyone else, there will be a little chit chat and common courtesy going on as well. The conservative cost estimate on this system is as follows: One person at an estimated 10 dollars an hour taking ten minutes daily to pick up the mail. This happens six days a week since they only close two days a year. There are fifty-two weeks a year and not counting postal holidays, there are 312 days of this activity (52*6). 312 days times 10 minutes minimum per day equals out to 3,120 minutes per year. 3,120 multiplied by the time cost .17, is $530 per year (3120 x (10 / 60)). That makes it just over ten dollars a week.

     This of course was a very conservative figure. When the ten dollar an hour employee is gone to get the mail, the job they were hired to do is not getting done. This means that the cost is actually double than the conservative figure. The cost is up to twenty dollars a week now and over a thousand dollars a year. If you take into consideration that the worker will need to catch up on any missed phone calls, orders, and other things, a greater cost may be realized. If the person has to work overtime each day, the cost will be even greater than the estimate. You may even want to do a more accurate costing by figuring in exactly how much a ten dollar an hour employee costs the company. The company provides healthcare, uniforms, and free lunches to the workers.

     You may be thinking that a thousand dollars a year is way too small to worry about. You may be right to a certain extent. The problem is if there is one little thing like this that can be improved upon in an organization, there are probable many more. If each one is costing the company a thousand dollars a year, you can see where these little things can add up to some serious money. It may be time for you to look around your company and find things that need to be fine tuned. You may be able to treat yourself to a great reward.

Friday, July 2, 2010

Event Planning with Volunteers

Event Planning with Volunteers

            There may be a time where you will be in charge of planning an event that involves volunteers. These volunteers are great assets that will allow the event to happen at a much lower cost. This cost savings is an even greater importance when the economy has cut event revenues to a bare minimum. How is the best way to go about organizing the unpaid workforce for an event?
            It should go without saying that each volunteer wants to feel that they have an important part, and that they are appreciated. Whatever you do, do not waste the unpaid helper’s time. Holding a meeting where no new information is presented, and where feedback or information is not sought, should be avoided. You will also want to avoid spending time with only a few select individuals, while ignoring the rest. Everyone that shows up should be equal in importance to you. Then what should the organizer do?
            An event planner should use this precious resource wisely. You may find in this rough economy that there are fewer volunteers. This means that efficiency is of the utmost importance. There are two parameters that need to be used in planning the people’s assignments. One is to have a list of assignments ready for the person to look at and check off their top three likeable duties. Giving the person the ability to pick their most liked duties will go a long way in satisfying the needs of the worker and may help influence them to work other events that you may hold in the future.
            You will also want to have a little questionnaire section below the list of possible duties. This list should help you decide how best to schedule that person and what duty to assign. Do try to keep the assignments within the top three assignments the person chose. The questionnaire should ask if they have cashier experience. If a person has this experience and one of their choices was selling tickets, then by all means, that would make you and that person happy. The more focused the duties and skills are, the more important it is to match each one. You may want to ask if a person is a First Responder, or Emergency Medical Certified.  By nature, these people will be on the watch for visitors with signs of distress such as heat stroke and be able to provide assistance. If put in a position where they are removed from the people and working in a backroom somewhere would be a disservice to the attendees. Putting people in the right places will also help protect you in a legal situation.
            In regards to the legal aspect, you will also want to ask if the volunteer has a felony conviction. You will probably want to put that person working somewhere away from children and other conflict raising duties. Sure, the person may not be honest and admit a felony, but it will go a long way in showing your concern. Please do not consider anything said here as legal advice since I am in no way an attorney. The scenarios are only mentioned to help you as an event planner see all aspects of the planning process.
            Considering the wants of the volunteers, the needs of the organization, and a strong consideration for individual attributes, the event should be uneventful (in a good way). Like with all relationships, some will work and others will not. You will however, find that merging people and duties in this suggested way will cut down on a lot of conflict and increase productivity. Following these simple suggestions, your event will be a success for all concerned. Try them and see the results. You may be surprised at how many repeat volunteers you have at your next event.

Wednesday, May 12, 2010

Managerial Finance

Managerial Finance

By Christopher Jetton

     Managerial finance is one of the most misunderstood positions in the business world. The title brings to mind someone staring at a spreadsheet with a bunch of numbers. This may be part of the job, but there is much more to it. Look at “managerial” and “finance” separately. The word “managerial” relates to decision making. The word “finance” relates to the control of money. If you think of them separately in this context and then put them together, you will have a better understanding of what managerial finance really is.

     Critical thinking plays a key role in the everyday life of a managerial finance employee or consultant. They look at the organization as a whole and use all information, not just a spreadsheet, to make bottom line decisions. They look for solutions to problems that may not even be apparent such as, “Can this or that be done more efficiently, at less cost, and if changed, how will that affect the rest of the operation?” You can see that they need to understand processes, people, and money related aspects.

     Recently there was a company decision to be made about an item carried in a retail store. The manager of the store requested that the item be removed from the store since it was causing problems at the store level. Corporate looked at the sales of that item and decided that the sales were too great to remove from the store. Who was right? Were the sales great enough to justify the item stay in the store? Let us take a managerial finance journey.

     First, we will compile the historical data concerning the sale of the item. The store stocks twelve of the item and they sell one a month. That means that the item has a turn of one. Turn is a term that represents how many times the inventory will be restocked during the period of one year to keep current levels. If they were selling one per week, it would take twelve weeks to sell all twelve items. There are fifty-two weeks a year, so in order to find the turn, you would divide fifty-two by twelve and come up with a turn of 4.33. In other words, the shelves would be full and empty of that product four and a third times per year.

     Each item cost the company 5 dollars and it sells for 15 dollars in the store. That means the company is investing $60 per year and receiving $120 on that investment. The breakdown looks like this: $60 to purchase the items that sold for $180 minus the $60 equals a $120 return on investment. This is really good since the store is doubling its money, right? Well, sort of.

     Out of the $120 dollars, you will need to pay for the overhead for the business. If all of the items in the store are the same size and require the same square footage of store space, you can simply take the overhead that includes all expenses such as salaries, rents, and everything else required to keep the doors open and dividing the overall expenses from the number of items carried in the store. Since we do not know what the numbers are in this situation, let us say that the expenses are 500k a year and you carry 10k items. That means that each item will need to produce $50 per item to break even. Now take the return on investment which is $120 and subtract the $50 from that. You will come up with $70 as the real return on the $60 investment. The company has more than doubled its money on this product. Fine, let the store keep it, right?

     Is it good to stop there and make the decision? Maybe we should look at the reasons the manager requested the product’s removal. The product is the only one of its kind in the store. It is a novelty item that represents a political figure. Who the political figure is does not matter since no political figure is loved by all. The manager knows that he must manage to keep the taboo conversations out of the workplace. Those are politics and religion. There are no other religious or political goods being sold in the store, and because of that, the focus is on the one item that brings politics into the equation.

     The manager was noticing that a good portion of the potential customers in the store would focus on that one item and express their opinion pro or con. Each time the politics where brought up, the manager would glance around the room and see that everyone in the store produces an agreeing smile or disagreeing frown. Many of the people simply walked out as soon as the store was perceived as a sponsor of the political figure. When the manager ran the math, it appeared that they were losing no less than one average customer sale during his half day shift per day. The average customer sale in the store is $30. The daily sales were reflecting an even greater amount, but for the sake of argument, we will use the one average customer a day loss.

     Take the average customer sale and put it into the equation. That is $30 a day in a store that is open 365 days a year. $30 times 365 days is $10,950 a year is what carrying that product is costing the business. Since there is only one item that is causing the loss, you will take the return on investment of $70 and then subtract $10,950 and come up with the estimated cost of carrying that product at $10,880. If you were to throw those items that cost the company $60 into the trash, the company would save over ten thousand dollars a year.

     This could be the end of the story since when the stuff hits the fan, most people duck for cover, but one more consideration concerning the manager is the workplace environment when politics is constantly being brought up by customers due to the political nature of the product. The employees take notice of who is for and against the politics related to the figure the product represents. This could very easily cause a perceived hostile work environment for a mere $70 in profit a year. It seems hardly worth the risk of a legal battle, doe it not?

     We could stop here, but in this particular company the buyer has the last say in what goes into the store. The buyer has been with the company for years and it has to be noted that the buyer has maintained the sustainability of the company. The buyer feels that if her decision is encroached on, she will need to seek employment elsewhere. Since she is a valuable asset to the company, with all things considered, the corporate decision may be to keep the buyer pacified. In this case, you would take the profits, let us say it is $100,000 per year and subtract the cost of carrying that product, $10,888 and come up with an $89, 120 argument to keep the buyer on the staff. If the company was to lose the buyer, it costs the company an estimated average of $10,000 to replace. This figure is not set in stone and since the buyer’s position is very important to the bottom line, the new buyer may cost the company a lot more, including all profitability.

     This exercise was not intended to make a mountain out of a mole hill or make business decisions more complicated. It should however help with understanding managerial finance and how it affects businesses as a whole. When the focus is concentrated on only one aspect of the decision process, the final decision may not be the best one. The next time a decision is made, look at it from all views and possibilities and put on the managerial finance hat. The more you practice this, the better business person you will become, and the health of the organization will be better because of it.

     "The above article was based on a real scenario and the final decision in the article matches the real life situation. As a consultant, I disagree with the final decision since it accepts huge risks in the sustainability of the organization. I can only consult and not make the final decision." Christopher Jetton 2010