|- Don’t Fall Prey to Any of These
|Companies fail for lots of reasons, but financial mismanagement generally tops the list. Here are five of my favorite reasons why firms bite the dust – based on many years in the trenches helping companies beat the odds.
1. Revenue – or rather quality of revenue. Many entrepreneurs – if not most – have a sales background, and they do what they do best – sell! I have seen many great sales tracking processes, incentive schemes, CRM systems and rosy projections. What I often don’t see are client gross profitability models, incentive packages that reward profitability and collectability, and concern about concentration of clients. When it comes time to value your company – make sure you have revenue quality.
2. Failure to Measure Gross Profit. Many small companies fail to distinguish between overhead costs and cost of sales. Cost of sales are those costs that are needed to make a sale: cost of product, cost of service delivery, payroll for service fulfillment. Overhead are costs that would be incurred whether you made zero sales or not: rent, admin, office costs. Failing to distinguish these costs properly means you have no idea how you are doing relative to peers, and have no way to control overhead or maximize profitability.
3. Lack of Costing Data. Many companies fail to develop metrics that can tell them the cost to deliver a product or service per unit. When you pin down your cost of service delivery, you can start to find ways to reduce or transfer costs and improve margins. it can be very enlightening when you find that revenue per unit does not come close to covering costs.
4. Poor or No Forecast. Unless you update your plan continually you cannot know where you are going. You have to forecast cash and revenue growth in order to plan for credit needs. Forecasting is essential if you want to convince buyers that you know what you are doing.
5. Forgetting the 80/20 rule. This well-known rule says that 80% of the dollars come from 20% of the transactions. Also 80% of your problems likely arise from 20% of clients. Once a month make a habit of reviewing your client list, your product or service list and your customer service issues list. Can you eliminate some of those bottom feeders, or put them on auto-pilot? It will make life easier and help put more focus on the real drivers of your business.
In this article in the Detroit Jewish News, I talk about the importance of networking as a way to build your business.
by Yaffa Klugerman
At the Jewish Professional Women’s Network meeting last month, the atmosphere was decidedly relaxed. Participants helped themselves to a light lunch while mingling and chatting. Later, they watched a presentation given by Karen Willner, owner of the YogaWeigh, about her business. The ambiance was so comfortable that it was easy to forget the event was actually a meeting of professionals whose careers included interior design, eldercare, real estate and financial planning. They were all Jewish Detroiters gathered there for the same reason: to connect and learn from each other’s businesses.
“This is a great way to refer people,” explained Rebecca Salama, a financial planner at Raine and Salama, who started the group about a year ago. “I’m much more comfortable referring someone with whom I have a rapport. And in the Jewish community, it’s a quicker level of comfort because there’s usually just one degree of separation.”
The group, which currently has about 15 members and meets once a month, began as a way to network with like-minded women in the community who all shared the common bond of being Jewish.
“The ultimate goal is not only to help each other grow our businesses,” noted Salama, “but also to have a sounding board for ideas and opportunities.”
At a time when communication often refers to a click of the mouse or a tap on the phone, many business owners are making new efforts to establish face-to-face connections. While Facebook and LinkedIn certainly play an important role in business networking, career experts agree that the most effective way to connect with other professionals remains the old-fashioned way: in person.
“There’s something to be said for human interaction,” said Salama. “You get a sense of someone’s personality, and word-of-mouth is by far the best way to refer someone.”
That strategy is particularly valuable during difficult economic times. Even with many area businesses struggling, networking has been proven to yield favorable results. Salama noted that she has already been referred to two new clients by group members and has used the services of four members of the group.
A Natural Bond
Nosh & Network, a business networking group run under the auspices of the Jewish Event Network, also is helping many Detroiters make connections and find employment. As with JPWN, the mood is relaxed and casual.
“It’s very low pressure and a very comfortable atmosphere,” said Adam Gottlieb, who runs the group. “We just go around the room and people introduce themselves and talk about their businesses. You just nosh and network and talk.”
Founded several years ago by Alyssa Cohen and Jason Brown, the group meets monthly, with anywhere from one to two dozen attendees. Gottlieb said that as the group’s name suggests, it’s “a bunch of Jews eating bagels and drinking coffee” who are trying to network with businesses. The connections form easily, Gottlieb said, because people already share a common bond.
“In the Jewish community, everybody knows each other,” he explained, “but not everybody knows everybody else.”
Those who are involved in business networking groups in the Detroit Jewish community can attest to their value. Edward Allon, a partner at B2B CFO, a company that provides part-time CFO services, has built much of his business on networking and referrals.
“The Jewish community in Detroit is incredibly interconnected,” he said. “Networking is much more effective with ‘affinity groups,’ such as the Jewish community, because you have a natural bond with those people that go beyond your business interests. You share natural connections with others with whom you have common bonds, such as Israel or local communal affairs.”
Allon has been involved with several Jewish business networking groups, including the Zebulun Society and Jewish B2B Networking. He also establishes connections through the Michigan Israel Business Bridge, which promotes economic and business ties between Israeli and Michigan businesses, as well as Lunch and Learns through groups like Aish HaTorah.
“Networking and building trusted relationships are the lifeblood of my business and most others,” he said. “That is true more now than ever. Most of my clients have been people I knew or people that they knew. When you work as I do helping businesses grow and thrive, referrals and reputation are everything. And networking is an essential part of that process.”
The Role of Jewish Values
Common roots certainly help foster Jewish business networking, but values play an important role as well. Shalom Klein, founder/chairman of the Chicago-based Jewish B2B Networking and publisher of Jewish Business News, also in Chicago, noted that helping people make business connections is based on Jewish teachings.
“As a child, I was taught that the highest form of charity is helping people earn their own livelihood,” he said. “This is a core value in the Jewish community, and I saw an opportunity to bring together people who sit together in synagogue on the High Holidays and Shabbat, but didn’t yet know what their neighbor does for a living and how they can work together. This is the void that we have been working to fill in the community.”
Jewish B2B Networking ran quarterly business networking events in Southfield and West Bloomfield in 2010 and 2011, but is now focusing on regional programming instead. In June, for example, the group is planning “The Business Event,” expected to draw 5,000 attendees from across the Midwest. Klein noted that in the two years since launching the group, 139 people have found employment.
Ike Engelbaum of West Bloomfield, who has been running the Entrepreneurs’ Network of Michigan for 25 years, has seen many success stories as well. One man, he said, joined the group after going through a terrible divorce, losing his job and custody of his children. The man established connections through the group and eventually became president of his own business.
The Entrepreneurs’ Network, which focuses on helping people achieve their professional and personal goals through support and education, has 250 members and meets every other week. Its membership is not limited to Jews, but Engelbaum, who also hosts a radio show, acknowledged that being a Jew helps guide his vision for the group.
“As a concentration camp survivor, I can certainly identify with how important it is to help other people,” he said. “America has been very good to me, and this is my way of giving back. The Jewish aspect of helping each other is a big part of my belief of how to be successful. If you help others achieve their goals, they will in turn help you achieve yours.”