How Tornados Are Good, And Bad, For Business

fairdale-300x200Before I get started, I want to say that I feel for people who lose homes, or loved ones, during a tornado.  Tornados are not a laughing matter in real life, they cause real damage.  And what do you do when your home is damaged?  You make an insurance claim, get a check, and fix the damage.

Then how are tornados good for business?  People hire companies and buy supplies to fix or rebuild their homes.  Companies benefit from the spending.

How are tornados bad for business?  For insurance companies who have to pay for damages, they are not so good.  Although rates may go up so they may benefit somewhat from future rate increases.

You can make these kinds of speculations with all kinds of things.  For instance, the population is aging.  What companies does that benefit?  What companies will suffer?

While these kinds of speculations benefit stock traders, they can also help business people.  How?  Say you are Walgreens.  What strategy can you take to serve older baby boomers?

What strategies have you taken in your business to anticipate change?

Stories Only Business People Would Understand

10004245_855682801114846_1636169639_n-300x300You have challenges that most people do not understand. You make an amount of money (revenue) that most people do not understand. They think you must be rich. But when it comes to spendable money, you have less than they do.

In fact, I feel a little poor right now.  I had three months without a project last winter.  I am behind on several things still.  But luckily my revenue, and profit after expenses, are decent enough to catch up at a pretty good clip.  Still, by the time I am done catching up, I may be between projects again.  I may be short on money to pay some bill, credit card, expense, in a manner that the creditor would approve of.

My best advice when it comes to finance is to make sure your margin is something you can live with through the good and the bad.  Your margin is your profit beyond expenses.  Or better put, profit divided by revenue.  Often we underestimate what our expenses are or do not include all expenses in our calculation.  Perhaps you do not include time off.  Or you do not include management expenses but only project expenses.  Best to calculate a margin you can live with and update it often when things become more tight than you expected.

What else?  I talked with my brother-in-law about paying myself once a year via payroll, but found the taxes withheld to be a bit high.  Who gets one paycheck a year?  Sometimes the guy at the top does.  The reason you might want to do this is to conserve cash until the end of the year when you really know what you can get away with paying yourself.

I also have a new appreciation for taxes.  For instance, the more you spend, the more you pay in taxes.  And I am talking about personal income taxes.  The more I spend personally, the more I am taxed.  It is better if my spending can be expensed to the business.  Or if I can save the money in a tax deferred account rather than spend it.  For those of you who receive a regular paycheck, this may be completely foreign to you… but when you have the option to pay yourself less, you really think about the money you spend.  You think that latte at Starbucks costs you $4.75?  Nope.  More like $7.50.  Think your car cost you $20,000?  If you paid in cash it is more like $28,000.  Every thing you spend that is not tax deductible has income taxes (as well as sales taxes) attached.

People sometimes think I am a little crazy to track my expenses like I do.  I am constantly trying to beat what I spent the previous week on travel.  Less on lodging, food, gas, everything.  I tried slowing down one week to improve my gas mileage.  I am usually buying food at the grocery, staying at the cheapest possible place… well I am paying all of my own travel expenses right now.  If I can save $50 a week even, this is a pretty good amount of money.  Think about it… that is $2,400 per year.  Good  business people watch their expenses like a hawk and make sure they keep improving the bottom line.  Why?  Because it is a very short distance between a good year and a bad one.

If you think all of this is mean to scare you non-business people, you would be wrong.  Being in business for yourself is very liberating.  You are the only one you have to answer to.

Only Actual Jugglers Should Multi-Task

Multi-tasking is when you start something, get to a stopping point, start something else, come back to the first thing for a bit, go to a third thing for a while, and so forth.  I notice that I will work on something to a point where I need to wait on somebody, or the computer, or perhaps even a new day, then go on to something else for a while before returning to it.  The problem with doing such things is that nothing ever gets done well.  Sometimes things don’t even get done at all.  Why is that anyway?

Your tasks are never tracked

In my defense, I usually keep a list of tasks to work on.  Then I work through the first thing until I cannot do any more, write down the status of the task, then move on to the next one.

Even doing this, I often forget to do things earlier on my list at the right time.  For instance, I work on something and need Bob’s help.  Bob won’t be back until 2, so I move on to my next task.  At 4, I remember that I have not talked to Bob yet, but by this time he has gone home.  So now I have to wait for tomorrow.

Many people never even go to the trouble of tracking their tasks and they might remember something that they should have done two weeks beyond when they needed to do it.  This is the kind of thing that causes havoc with your business, when you do not do something in a timely manner (i.e. from the time you get the task until the time it is complete).

Problems interrupt you

Compounding the multi-tasking problem is the multi-tasking because it is really, really urgent problem.  Usually this leads to the need to relearn and restart a task that you were working on before.  If you have several half started things, a problem can completely wipe out your memory of all of those tasks.

Multi-tasking is slower than single-tasking

The kinds of issues that we work on are so complex these days that it takes a while to learn what you are dealing with.  Though in the act of juggling several issues, we are learning all the time and doing none of the time.  Something I learned over the years is that it is better to work a task through to completion rather than trying to juggle tasks, as it is more efficient.  Perhaps that seems counter-intuitive, but it is true.

Working a single task at a time leads to higher-quality work

Can’t devote the time to doing a task right?  There’s the problem.  Rather than making sure something is done well, our juggling leads to lower quality as we try to move things through faster.  Doing something right the first time means less rework, and you guessed it, less time to do a task overall and a better quality outcome.

It is hard not to justify multi-tasking

Multi-tasking makes you look busier, yes.  But as a business professional running his or her own business, you need to be more effective, not more busy.  You are the boss, you do not have to look busy, there is nobody but yourself to justify multi-tasking to.

Rather than trying to justify your busyness, why not put it to the test?  Measure a day of multi-tasking against a day of single-tasking, and see how much you are able to achieve, and the quality of your achievements, both days.

Multi-tasking is bad for our brains

Studies have shown that not only does multi-tasking make you less efficient, it is also bad for our brains in the long term.  According to the Mail Online, multi-tasking can create severe stress, rage, and impulsivity in adults, potentially leading to cardiovascular disease as we age.  In children it can create learning problems and autism-like behaviors.  So it is not at all healthy to multi-task.

What do you think?

Still not convinced?  Let me know what you think by commenting to this post.


Elgin O’Hare – The Highway To Nowhere

Have you ever made big plans, started working on them, then gave up after getting started because you run out of money, time, or distractions just get the best of you?  That’s what happened to our Elgin O’Hare expressway, that goes neither to Elgin nor O’Hare.  The state ran out of funding to complete the project so the expressway is now just 5 miles long and connects Lake Street in Hanover Park to the 290/355/55 expressways after a stop light.  How do we make sure our projects don’t end like this?

1. Break your projects into the smallest pieces

An accurate estimate of your project costs can only be gotten by breaking the whole project down into it’s smallest pieces and estimating the cost for each piece.  Add up the total to get the total project cost estimate.

2. Double your estimate

To give yourself some room for the unknown, double your estimate for the cost of the project.  There is always scope creep to any project, or gotchas that catch you at the worst possible moment, so allow for additional costs.

3. Is there known risk to your project?  Double your estimate again.

If you know that there are possible risks in your projects that you can identify, you must allow for more cushion to work with.  Things don’t always work out for the best case scenario.

4. Is this a multi-year project?  You must consider inflation and capital costs.

Add in estimates for inflation and capital costs for the life of your project for multi-year projects.

5. Recalculate your return on investment given your new estimate

Is your project still worth pursuing?  Your ROI must still be in line after completing your cost estimate, otherwise you might want to abandon the idea at this point.

6. Make sure you have enough available capital to run your business

Given your estimate for project costs, will you continue to have enough capital to pay your normal expenses while implementing your project?  Are there capital risks during the life of your project?  How will you compensate for cash flow issues?  All important things to consider.

Hopefully these ideas help so that you don’t run short of funding while implementing your big project.  Do you have any other ideas that might be helpful?

Introduction To Human Resources Management

With a title like that it’s most likely you’re on to the next article or website… Managing human resources is not the most glamourous part of running a business, but it is critical to the success of your business if you need extra hands to help you out.  Here are some of the areas that small business people often fall short on:

  • Hiring the right person for the need
  • Evaluating an employee’s performance
  • Motivating employees properly
  • Delegating without giving away the store
  • Training employees for growth

I can tell you that there are whole books (i.e. textbooks) written about human resources, and probably whole books written on the above areas of human resources.  And perhaps you just want to hire an employee to help you with a particular area of your business that you just don’t have time to deal with.  So reading a book about hiring the employee is probably out.  However, screwing up the hiring process can cost you big time, so let’s take a quick look.

What do you need the employee to do? Make a list of tasks you expect the employee to handle.  What do you expect his day to look like?  What functions do you want to offload to her?  What long term objectives do you want them to achieve?  Write it all down.

What qualities will the employee have? Do they need to be college educated?  Do they need to work well with others or just work well with you?  Can you train them on the job, do they need to be trainable?  Make a list of attributes you expect your new employee to have.

What must you pay them? Yes, your new employees expect to be paid.  How much can you afford to pay, taking into account double taxation, benefits, and base pay?  How much is this position being paid in the marketplace (a little research)?  Do you offer something unique to the employee that they might be willing to work for less?

How do you reach them? Are you going to use a recruiter or a newspaper ad?  Some methods of recruiting are going to work better for some employees and some for others.

Work with your friends? Think long and hard before you put your friendship on the line by having your friend work for you.  Friends are no longer friends once they are on your payroll, so it might be better to work with a non-friend.  Relatives are even worse… but some people find working for/with friends or relatives works out ok, just consider the potential downfalls.

Prepare for the inteview. Before you interview your candidates, and there should be several, be prepared with written questions to ask your candidate.  Keep notes of answers and grade them on fit to the position once the interview is over.

Making the offer. An offer of employment is a written letter to the candidate specifying all of the details of the offer.  How much is the salary, what is the starting date, what are the conditions of employment, etc.  You should consider your offer letter to be an initial contract with the employee… and what you leave out is just as important as what is included.

Good luck hiring your first employee!  Keep yourself organized and things will work out much better.

What Is A Project?

You may think of a project as customizing your kitchen or planting a garden, but in business it is a couple things: It is a solution to a problem and it is an investment with a return.

A solution to a problem

Why are you doing this project?  I’m sure you’re not working on the project just because you had nothing else to do.  It is usually because there was a problem that you needed a solution to, and your project is your solution.  Now the project might be a major IT project, or it could be just a minor change in business process, but it is always meant to solve some sort of problem.

An investment with a return

We talked a couple of weeks ago about valuing and investing in stock. Similarly, a project is typically an investment in time and or capital with an expected return.  For instance, we had a project to change much of our transportation paperwork to fit on fewer pages and print two-sided.  The investment was mainly IT time and the return was less spending and waste of paper.

You could have all kinds of different projects that fit this criteria: product development, marketing, sales training, ERP implementations, process improvements, and reorganizations all fit.  You invest in a change, a project, and either save money or make more money.  The return you should expect may vary by the amount of risk built into the project.  You might expect a big, risky project to have a 40% return for example, where a risk-free project may return 10% or less.  Remember, though, that if the money is worth more to your shareholders, you really should pay it out in dividends rather than invest in low-return projects.

Exceptions to the rules

Let’s say you have a project you need to do but it doesn’t have any return. Then why do you want to do it? Perhaps you have a major customer that changes their requirements to do business with them.  So you do a project to solve the requirements problem with the customer, but nothing changes really.  You’re still doing the same business.  Well, the return is actually the business not lost.  The alternative would be to lose the customer and the revenue that goes along with them.  So there is a return after all.


So you typically do a project to solve a business problem.  And it’s an investment with a return.  You should make a judgement if the return is worth doing the project.  You may even have a list of projects to do that you can prioritize by the expected return, perhaps weighted by the risk.  Most businesses do always have projects meant to improve the business in some way.  And, hey, you’re either growing or shrinking so best to keep growing.

5 Things Not To Do When You’re In Business

Here are the top 5 things not to do when you’re running a business:

1. Let your ego run away with you

They say that power corrupts, and absolute power corrupts absolutely.  If you’re making $10,000 a month and your business is growing, you feel quite a bit of power.  That can lead to an inflated ego.  If your ego gets too big, you can make some bad business decisions.

So, if you are presented with a problem and you need to come up with a solution, best to put away your ego and evaluate the problem in the full light of day, unclouded by emotions.  If you let your ego or emotions rule your decisions, that can lead to some very bad places.

2. Piss off your only vendor

Ah, sometimes you just want to tell it like it is. Your vendor sucks. They deliver the product when they want to. Sometimes they lose your order. They can demand that you sell their product in certain ways. They can be impossible when you want advertising approval. Ok, they suck and you just want to tell them to go to hell. Then what?  If this is your only vendor and they are the only vendor of a best-selling product, well you have to play the game their way because you have no other choice.  Go out and find a new vendor of the product, or find another great product, but in the mean time the best policy is to be as nice as possible to this one.

3. Piss off your biggest customer

Nothing can put you out of business faster than by losing a customer that makes up more than 50% of your business. The best policy, in fact, is to not piss off any customer because customers are expensive to acquire. I have to admit, sometimes there are situations that you can do nothing about, but if you can do something you should do it.

4. Piss off the people you depend on

Are you busy, I mean really busy?  You need the people that work for you and you should do everything you can for them.  Otherwise, you are going to take on a boatload of new work that you hired them to help you with.  If they are doing a really good job, reward them in some way.  If they are lazy, cut them loose.  But don’t make their life a living hell.  This is not fair for them or you.  You either need them or you don’t, choose.

5. Do other stupid things that lead to expensive mistakes

Mistakes are expensive so decisions are best made methodically rather than hastily.  Sometimes you need to make quick decisions but most of the time you can take a few hours or days to evaluate the situation.  Best to do this than to make a quick decision that costs tons.  Oh, and by the way, cheap goods and services sometimes have high costs, so evaluate well.  Better to pay a few dollars more for quality.

So what would you add to this list?

How To Get Organized

We are busy people.  We work full-time jobs.  We have families, activities, house work, house maintenance, and errands.  Now we have a part-time business with demands.  Everything you do is important, including the hour or two with a good book or television at the end of the day.  Our objective in time management is not necessarily eliminate time wasters, but to do more in less time.  At least this is what I try to do.

The book “The 7 Habits of Highly Effective People” teaches us that we must do the important things before we do the urgent things.  At least we must attempt to do the important things first.  Because the urgent things we need to do usually need to be done because an important thing wasn’t done.  So how do we know what we have to do and what should be done first?  We need to make a list.

A list is written on a piece of paper.  I usually start out with a clean sheet daily and put down the tasks from the previous day that were not done.  Then as I think of things that need to be done, I add them to the list.  I do this because I usually think of new things as I go about my day, and rather than try to do them right at that moment, I add to my list.

When you are ready to work on your list items, prioritize them by importance, then do the most important one first.  Do your list item by item until they are done.  You may need to group your list by things to be done in the house, things to be done at work, things to be done while out, things to do/get at the store, etc.  As you get used to using a list, you will find that you can perform your individual tasks quicker and quicker, leaving more of the day free to do other things.

Many people can multi-task but if you find that this is becoming a problem, change to doing things one by one.  You can tell it’s becoming a problem when you have many partially finished tasks waiting.  A ringing telephone, new email, and other distractions often can wait until you are at the end of your list.  When I was running my business from home I would often allow telephone calls to take precedence so that I could talk to customers and distributors.  However, if you find that answering the telephone is becoming a distraction, let the call go through to the answering machine and return calls later.

We do need to eliminate those things that are really not important and are distractions from what needs to get done.  Things like reading email, looking at facebook or twitter, bored surfing the internet, watching tv, or anything else that can get in the way of getting our list done.  Those things can have a time and place and as you get more efficient you will find you have plenty of time for these things.

If anybody has any other ideas for time management please let me know.  I still have yet to figure out how to organize paperwork and such.  My corporate taxes are going to be interesting this year.

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