Monday, October 24, 2011

Mission Impossible: Not Anymore

imageThis article was written by Michelle Rusillo, SCORE Orange County Management Counselor

Having a mission statement can lead a team to improve teamwork, to create a productive work environment, improve profits.

The mission statement

A mission statement is an inspiration clear succinct statement that clarifies the purpose of the business. The mission statement would lead the CEO and their employees to better understand the purpose of the business. The mission statement makes the purpose tangible for all employees to understand. This mission would guide each employee through decision making while interacting with customers/clients and co-workers. This mission would also guide the leaders to make good decisions that benefit employees and most importantly the customers/clients. This mission is the beacon in the night that directs everyone to improve teamwork, create a productive work environment, improve patient compliance and increase profits.

A mission statement is critically important to the foundation for all businesses. The mission statement is equal to a home’s foundation. The foundation keeps the home strong during turbulent times like a mission will do for a business. Unfortunately, leadership does not always have enough exposure to the purpose of a mission statement and never developed one.

The mission incorporates a strong statement to the commitment of services. For example a local veterinary company wanted its clients and their pets to be well taken care of at each and every visit to their hospital. They chose a mission to state “to provide quality compassionate care to the client and their pets”. The mission directs every employee to know what is expected of them to do. There now was no question in employee’s mind what was their purpose when they are working. At any point , when a question of what should I do occurs during an exchange with a client , the employee refers to the mission and follows its sentiment.

Educate you, employees, customers and the community

The mission statement needs to clearly state your business goals and objectives. It should explain what the business is, what special niche and how you will make a difference in the lives of customers and clients. It should tell you what you need to do to thrive and help initiate activities and set priorities for the investment of your limited resources. It should clearly state the goals and values of the organization. In addition, the mission should express the future goals and dreams of the organization.

Once the mission statement is complete start sharing it by posting it everywhere, prominently displayed on the company’s Web site, as part of the social media plan as well as in brochures and other marketing material. The mission statement is an essential leadership tool. It will help align activities to match future goals, create desirable change and focus the workforce towards the company’s vision.

Mission Impossible made possible

Once a mission is written, implemented and communicated, there will be a transformation of employees understanding and performance which will increase revenue too. Having a mission can excite the employees, given direction to the business and clearly identified the value and philosophy of the business. The leadership will know its scope and purpose; now so do all the employees. A mission statement is critical for any business, writing one is not mission impossible. This is not an impossible task but a critical one for leading your business to improved quality and customer service.

8 Easy Ways to Lose Customers

imageThis article was written by Jeff Haden | September 26, 2011, reprinted by permission

Jeff Haden learned much of what he knows about management as he worked his way up the printing business from forklift driver to manager of a 250-employee book plant. Everything else he knows, he has picked up from ghostwriting books for some of the smartest CEOs he knows in business. He has written more than 30 non-fiction books, including four Business and Investing titles that reached #1 on Amazon's bestseller list. He'd tell you which ones, but then he'd have to kill you.

Visit his website at: www.blackbirdinc.com

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Since often your most profitable customers are long-term customers, don’t lose them by

making these mistakes:

  1. Accept high employee turnover. High turnover is a fact of life in a few industries, but in most cases employees leave because they aren’t treated well. So do customers. Unless systems truly drive your business, you cannot expect to have long-term customers unless you first have long-term employees. If turnover is high, find ways to fix it. Otherwise customer turnover will always be high as well.
  2. Treat new and existing customers too differently. Offering discounts or incentives to land new customers is often necessary, but existing customers can quickly resent the fact their loyalty is not rewarded. Think hard about the carrots you offer new customers and make sure you “reward” existing customers as much if not more. And never forget that while new customers make an immediate top-line impact, sales to existing customers typically create a bigger impact on the bottom line.
  3. Introduce too many new faces. It’s easy to assume long-term customers love your brand, but more often than not they love your employees. (Customers buy from people, not companies.) Relationships are the lifeblood of most small businesses so don’t rotate salespeople, customer service reps, or key contacts unless absolutely necessary. When employees build relationships with customers, do everything possible to protect and foster those relationships. Employees are rarely interchangeable where strong business relationships are concerned.
  4. Focus too heavily on price. Being the low-cost provider is a competitive advantage, but good luck maintaining that advantage. Somewhere, someone is planning to steal your customers by cutting prices. You goal is to provide the best value, not necessarily the lowest cost, because value is an advantage you have a much better chance of maintaining through a combination of price, schedule, service, and relationships. If your marketing focuses mostly on price you’ll train customers to constantly look for a lower price — either from you or from your competition. Spend at least as much time finding ways to increase value as you do finding ways to lower costs and prices.
  5. Push too hard to grow customer revenue. Trying to sell more to existing customers is great, but don’t do so blindly. Know what each customer needs first and only then try to meet those needs. Never suggest a product or service a customer doesn’t need. And never say, “Is there anything else we could do for you?” unless you already know the answer and are ready to describe and provide a great solution. Otherwise you’re just pushing — and customers hate being pushed.
  6. Take your principals for granted. Every business has principal products or services that “keep the lights on.” Every business also has key customers that keep the lights on. Those are your “principals” (the association with “principle” is intended) but over time they can be taken for granted while newer, sexier, higher profile initiatives get all the attention. Make a list of the customers you can’t afford to lose. Then list what those customers buy. That’s the foundation of your business. Make it a principle to focus on your principals.
  7. Encourage the wrong focus. This happens most often in sales, when commission rates are much higher for new customers than existing customers. If that’s the case and I’m a salesman, why should I work to maintain existing accounts when I get paid a lot more to find new ones? That approach only works if someone else systemically takes over the responsibility for keeping an existing customer in the fold. Think about the incentives you provide and goals you set and make sure you encourage the outcomes you really want.
  8. Make it difficult to resolve problems. Policies and guidelines are great for ensuring employee compliance, but a customer with a problem doesn’t care about policies; she just wants her problem fixed. Let employees see complaint-resolution policies as guidelines rather than rules and allow freedom to make judgment calls. Resolving a customer problem or complaint can actually be the moment when your business establishes an even stronger customer relationship — if your employees are free to make that happen.

Drop Shipping - How To Reduce Your Inventory and Not Lose Sales

imageThis article was written by Michael Capsuto; Certified Public Accountant, Doctor of Business Administration, SCORE Orange County Management Counselor

Businesses are always afraid of losing a sale. Certain products are kept readily available in their inventory even though there is not much demand for it. There are many costs incurred - the costs of purchasing it, warehousing it, and maintaining it, all in hopes of a sale. If the product does not sell you risk not recouping your cost but also negatively impacting your cash flow. One possible method of reducing this risk while not losing sales is through drop shipping.

What is drop shipping? Drop shipping is an inventory reduction technique where a seller does not keep a product in stock for immediate delivery to a customer. The seller routes the order directly to a supplier who in turn ships the product directly to the customer. The seller makes a profit on the difference between the selling price and the supplier's price. The supplier can be the manufacturer or distributor of the product.

Who uses drop shipping? Businesses large and small use drop shipping. Examples are:

• The television home shopping programs. Orders are received from viewers. The order is then forwarded to the supplier who ships the merchandise to the customer.

• Retailers that sell large ticket items such as carpeting, appliances or furniture. They keep sample items or a similar items in the store so that the buyer can inspect it prior to purchase. The seller takes a deposit or full purchase price and has the desired item drop shipped from the manufacturer or distributor.

• Customized products such as coffee mugs or t-shirts with the buyer's logo. A manufacturer produces the product to the buyer's specifications and ships it directly to the customer.

• Others use drop shipping when selling through online auctions, catalogs or websites. This method of customer buying is becoming more popular each year.

What are the benefits of drop shipping?

Drop Shipping has several benefits.

• There is a positive cash flow. The seller is usually paid in full or receives a deposit which can cover the seller's cost, at the time the purchase is made. The seller does not pay the supplier until the merchandise is shipped. There is this period of time in which the seller has the customer’s money until the payment is made to the supplier. This is called float.

• There is a facility savings. By not stocking a slow selling item, warehouse space is reduced. This results in savings in rent, insurance and maintenance. Alternatively, the space can be used for stocking more popular items or to expand your product line.

• Become a full service seller. Most businesses stock items that are fast selling and ignore other slow selling complimentary items. By having access to catalogs or websites to show customers these products you can increase sales.

What are the drawbacks of drop shipping? Drop shipping is not without its difficulties.

• Drop shipping is not an across the board method for reducing or eliminating inventory. The products must be carefully selected. Drop shipping works best in cases where the customer has an expectation of waiting a reasonable period of time for delivery such as products that are customized, large ticket items, difficult to find, or normally ordered from a catalog or websites. If the product can be found readily on hand elsewhere, you will not only lose the sale but also the customer.

• The ability of the supplier is critical. The supplier must be reliable, have the item in stock, ship on time, and in the quantities and quality the customer expects. The shipper is invisible to your customer, therefore any problems that arise are a reflection on you.

• The customer may find out who are your suppliers and go directly to them for future sales. This can be overcome by “blind shipping” (shipping merchandise without a return label or with just a return street address). Other methods include customized shipping labels with the return address of the seller, customized packing slips with the seller's name, logo, and contact information.

• Increased costs. Unit costs may be increased when purchasing small quantities to meet a specific customer order rather than purchasing larger quantities for your inventory. There also will be added packaging and shipping costs imposed by the supplier. These must be considered in determining your selling price and profit margin.

What is the difference between drop shipping and a fulfillment house? Using drop shipping you do not purchase the inventory until an order is received or shipped to a customer. When using a fulfillment house you are out sourcing your warehouse operations. You purchase the products prior to sale in the quantities that are anticipated to be sold and park them at the fulfillment house. The fulfillment house stores receive your orders, packages, and ships the ordered items to your customer. The fee that is charged you is generally less than maintaining your own warehouse operations. For small businesses or start-up companies that may not have adequate storage facilities or the funds to build them, a fulfillment house can satisfy their warehouse needs.

What are the steps necessary for successful drop shipping? There are several important procedural steps in using drop shipping. These are detailed below.

• Verify that the customer is an approved buyer. Other than a cash buyer, it is possible that the person who signed the purchase order is not authorized to do so by the company.

• Verify that the supplier has the stock on hand. The customer expects a reasonable shipping time. If the items are not in stock notify the customer of the additional time needed to receive the order.

• Confirm prices. If the supplier’s current prices are significantly different than what was included in determining your selling price, discuss the situation with the customer.

• Substantiate that the customer's has sufficient credit before forwarding the order to the supplier. Once the customer receives the items, it becomes difficult to obtain payment.

• Verify that the order was received and processed by the supplier. This is the highest risk in the drop shipping process. Verification can be done simply by fax, email or phone.

• Match the bill of lading to the customer’s order. Request that a copy of the bill of lading be sent to you at the time of shipment. A bill of lading is a document issued by the supplier to the shipper itemizing the items shipped and delivery point. Match the shipped items with the customer 's order. This information is needed to invoice the customer. An invoice should be sent to the customer even if they paid you in full at the time of purchase. This keeps the line of communication open and also provides an additional opportunity to sell other products by including brochures and marketing information with the invoice..

• Investigate all open orders. Open orders are old orders that have not been shipped or shipped orders with a small number of items in backlog. Follow up on these open orders to determine if the supplier is able to ship them or if the customer still wants them.

• Maintain good customer service. Follow up on all customers periodically. Do not assume that once the merchandise is received by the customer that all is well. Resolve all issues to the customer's satisfaction. Benefits of maintaining open communication are customer loyalty, customer referrals, increased customer satisfaction and increased revenue. Good customer service is so important that it often is the difference between businesses that survive and those that fail. There is an old business expression: “No customers, no paycheck”.

Employee or Independent Contractor – An Update

imageThis article was written by Robin Noah, SCORE Orange County Management Counselor

For some time, Human Resource professionals have been advising clients to make sure they are classifying their workers correctly or suffer the consequences. Not everyone they hire as an ”Independent Contractor” meets the IRS description of an IC.

It is estimated that more than 10 million American workers are classified as independent contractors. But how many of them are really self-employed and how many are falsely labeled as such by unprincipled employers?

That's one of the questions the Senate Committee on Health, Education, Labor and Pensions (HELP) set out to answer in a hearing on employee misclassification in 2010.

A 2000 study commissioned by the Department of Labor found that up to 30% of employers misclassify at least some of their employees. The practice is widespread in the construction industry and in low-wage and gray market sectors of the economy. By misclassifying their workers employers can cut their labor costs by up to a third.

Some employers mislabel their employees as contractors in order to avoid paying Medicare, UI and Social Security taxes. Committee Chair Tom Harkin (D-Iowa) pointed out this kind of tax evasion is costing cash-strapped state unemployment insurance funds billions of dollars a year.

Who counts as an employee? The law takes a pretty commonsense view of the question. Basically, if you work for wages with the employer's tools at the employer's workplace under the employer's supervision, you're an employee. True independent contractors are literally in business for themselves. They invest capital in their own ventures and share in the profits or losses of their enterprises.

Most workers don't realize that most of the rights they take for granted in the workplace derive from their legal status as employees. For example, most anti-discrimination laws are written in terms of what employers can do to their employees. Contractors may not be protected.

In January of 2010, the DOL hired more inspectors to combat misclassification. The President's 2011 budget calls for an additional $25 million to help the DOL, IRS and other agencies address the problem.

The IRS recently announced a new voluntary disclosure for companies with misclassified workers. Workers are frequently misclassified for a variety of reasons, either intentionally to save costs, or unintentionally because of a lack of knowledge.

Misclassification reduces tax revenue in two ways. First, those classified as self-employed are less tax compliant than W-2 employees and second the employers fail to pay unemployment and Social Security and Medicare due on employee salaries.

The IRS has estimated that misclassification costs the treasury over $1 billion per year. Those companies misclassifying employees also improperly avoid paying benefits including vacation pay, sick pay, workers compensation, health insurance and retirement benefits.

If the IRS determines you have misclassified a worker as an independent contractor rather than an employee, get out your checkbook. You may be charged for back taxes, interest and penalties. In fact, there is even the possibility of criminal charges. And in some cases the misclassified worker has been able to sue the employer for lost benefits during the time in which he should have been considered an employee.

The IRS has a set of guidelines an employer can use to determine the proper status of a worker. After reviewing the criteria, if you are still uncertain, the IRS will make the determination for you if you file the form SS-8.

While in the short-term, using independent contractors in your business may save you money, it could cost you significantly more in the long-term.

Make sure you choose wisely.

For more information, check out these articles on www.Business.gov

How to Become an Independent Contractor and Hiring Independent Contractors

The SCORE Advisory Board

imageThis article was written by Dennis Wright, SCORE Orange County Management Counselor

"It's hard to believe all of this costs me nothing"...  that's what he said after I recapped a plan to help him meet the challenges and opportunities his business was facing. 

It all started with an e-mail in which this business owner asked for help with increasing sales.  When I received it I contacted him and made arrangements to meet him at his office, to get acquainted and to determine exactly what we could do to help him and who within our Chapter would be the best person or persons to provide that help. 

Of course as I was driving down the interstate to that meeting I was already mulling over several ideas, but when I arrived; when we finally sat down together I listened to him outline his situation in more detail and it became apparent there was much more we could do for him.  Much more!

I not only learned how far his sales volume had declined, but that marketing was almost non-existent, that inventory had grown, that several suppliers were becoming "anxious", and on top of that his business was housed in a facility about twice the size needed. 

So what was the end result of that meeting: a quick fix?  No, but I assembled a team of SCORE counselors - each with different experience and skills - who subsequently visited that business one at a time to address matters within their respective field of expertise and made recommendations for needed change.  In addition, one of them assumed the ongoing role of mentor. 

And what did we get out of it?  A chance to put our experience and skills to good use, and a heartfelt thanks from a business owner who needed help... and it all started with that very short e mail.   

We certainly can't make personal visits to every Orange County business in need of help, but you may be surprised who we will visit / who we do visit.  Take a quick look at our Advisory Board application using this link: http://www.score114.org/advisory.aspx  We recognize that it's hard for many business owners to get away, to come in for advice.  Advisory Board represents one of our several solutions.