The Ugly Truth About Small Business

Pay For Training Time

Continuous training is necessary so that everyone know what is expected and ways to do his or her job better. There have been questions about paying for training time. This is a non-issue because the law is very clear on paying for training.

The reason that I learned about this is because of an employee who felt that he was fired wrongly after being at the company for over 7 years. (He wasn’t; the policy was being followed.)

This former employee set out to see how much grief he could give the owners and went to the Department of Labor. He found out that you had to pay for training time. This company had, and still has, a meeting every Monday morning. Everyone is required to come. However, they were not paid for the meeting. To make a long story short, the employee reported the company.

The Department of Labor investigated and found that the company was not paying for training time and fined the company. The former employee wanted 7 years of back pay for 52 hours. The statute of limitations at that time was three years. So, the company had to pay the former employee and everyone else 52 hours for three years plus interest and fines. This was a costly lesson to learn.

Here is the law on paying for training and meetings…which I quote out of the federal regulations:

Lectures, Meetings, and Training programs:

Attendance at lectures, meetings, training programs and similar activities need not be counted as working time if the following four criteria are met:

(a)Attendance is outside of the employee’s regular working hours

(b)Attendance is in fact voluntary

(c)The course, lecture, or meeting is not directly related to the employee’s job and

(d)The employee does not perform any productive work during

I don’t have a problem complying with a, b, and d. I can’t find a legal way around c. If you are having a meeting or a training session, that session is always related to the employee’s job.

If anyone has found a legal way around the third criterion, please let me know and I will pass it along. As far as I can tell, you have to pay for training and meeting time.

Ignorance of the law is no excuse. Forewarned is forearmed!

Your Employees are Like Kids

When it gets busy I often see rules “slipping by the wayside.” When corners are cut, sometimes the rules are broken or not enforced. The excuse? It’s busy.

It’s busy can’t be an excuse for not following the rules. They are there for a reason and must be enforced in slow times and busy times. If you see someone doing something against the rules, even if it is your best employee during your busiest month, you have to talk to him, write a warning and continue as if it were not the craziest time of year.

I’ve often said that your employees are your surrogate children. In many cases they act like kids and you have to treat them like kids. (Any many of you thought that you were finished raising children!)

You have to tell them how to behave when answering the telephone, in front of customers, and in the office. You have to tell them how to dress (and in some cases bathe). You have to tell them what the rules are and the consequences of breaking the rules. Like children, some will see how far they can stretch the rules without getting caught or getting in trouble.

This is where discipline comes in. First you have to have the rules; i.e. an employee manual outlining what you expect from an employee working with your company. The rules let everyone know what is expected of them and the consequences of not following the rules.

Next is enforcing the rules…and they have to be enforced uniformly. Everyone needs to see consistency. If you treat employees differently, you’re going to get the questions “why doesn’t John have to do X and I don’t?” or “He’s not following the rules, why do I have to?” These are not the questions that you want to have to answer. In some cases you may not have been aware that John had done X and you have to talk to John about X. In other cases, you are aware that someone did something and you have to enforce the rules.

You can’t play favorites. There may be times that you hate enforcing the rules because you really like an employee who screwed up. However, you can’t have different rules for employees who you like more or employees who are more productive or employees who you perceive to be so valuable that you can’t lose them. The first time you let someone get away with breaking the rules and not being disciplined, you’ve lost that policy. Others will think they can break the rules and get away with it too. And, they can. You can’t show favoritism when enforcing policy. Favoritism has gotten a lot of companies in legal trouble and cost them thousands of dollars.

The rules can change over time. As your business grows or as the legal environment changes, sometimes your policies must change to conform to the new business conditions. If someone challenges you in court, ignorance of the law is no defense. So, make sure that you stay on top of the employee laws in your state.

Why You Must Train Your Employees

Over the years I have heard many contractors say, “Why should I train my employees because they will leave?” The greatest answer I heard was stated by one of the trainers from Lennox Industries many years ago, “What happens if you don’t train them and they stay?”

Continuous training is critical to keeping your employees and growing your business. How are your employees supposed to know how to answer the telephone? How to do their paperwork? How to handle a customer complaint? How should they greet a customer? How should they do their diagnostic work? What should they do in a customer’s home or office? Unless you have mind readers at your business, you need to educate them on how you want YOUR company represented to your customers and the public at large.

Better trained employees means more satisfied customers, more revenues, more profits, and more contented employees. What is wrong with this? Nothing.

It doesn’t have to take a lot of time or a lot of money. Communicate what you want your employees doing in the presence of customers or with customers on the telephone. If you aren’t good at public speaking, write down the list and go over it during a 10 to 15 minute meeting. Follow up to ensure that what you want to happen is happening.

The first training meeting you have will be shocking to your employees. The second, regular meeting will be less shocking, and then they will start getting used to them. If you do them right, they’ll even start enjoying them.

You’ll find that you’ll have less customer complaints, more sales and higher profitability.

Training gives you a triple win.

What Do You Measure?

One of the people that I interviewed for my second book, The Ugly Truth about Managing Right, talked about the fundamental thing that you must measure for success. In one of his businesses it was the numbers of stalls rented in his horse farm. In another it was the number of packages brought into the store each day.

You have to know the revenue per measurement and the cost per measurement so that you know the profit per measurement. He knew the revenues and cost per stall and the revenue and cost per package sent.

It got me thinking...What is the one thing that we must measure to ensure that we have profitability. If your company is departmentalized, then this question should be answered around the one product in that department which must be measured to determine profitability.

If you are a service business it might be billable hours. What happens when the number of billable hours increases? Decreases? That’s obvious…more or less profit. The most important thing you must do is maximize billable hours.

Determine what the measurement should be. Then determine the revenues and cost for that measurement. Remember to include a piece of overhead for that measurement. If you don’t like the answer you get, then find a way to increase revenue or decrease expenses for that unit of measurement. You’ll be on your way to increased profitability.

Simple Marketing Ideas That Don't Cost an Arm and a Leg

Everyone sells. Marketing is a function of sales. Here are three easy things you can and should do:

1. Marketing doesn’t have to cost a lot. The cheapest form is a business card. All of your employees should have one with their name printed on the card and the company’s telephone number.Why your employees? Because they have friends, they go out, and they talk about their job. You never know where the next sale is coming from!

Make it a habit to distribute 500 to 1000 cards per year. You’ll never know when your happy customer will pass it along to a neighbor, co-worker, or relative who needs your services.

2. Always wear clothing with the name of your business on it. You will get stopped in supermarkets, malls, etc. by people who have a need for your type of product. These conversations result in additional sales for your company…simply because you are advertising the name of your business.

If someone gets the courage to stop you and ask a question, you must always ask for the order: to service their unit, do an estimate, or what ever the person’s questions were about.

Don’t lose the opportunity!

3. Public relations activities are important. These are the things that you do to give back to the community. Volunteering your time and allowing your employees to volunteer their time increases your company’s exposure to your customers and potential customers. This gives you additional opportunities to sell; although they are very subtle situations. Do something good to give back.

How You Answer the Telephone Counts!

I returned a call from a person, let’s call him Steve. Steve wasn’t there. However, the person answering the telephone didn’t speak English well (the company was in the Northeast; not Miami. I decided that I would just call back the next day. Then I started wondering how a customer would feel when this person couldn’t answer questions well. She probably would call a competitor.

A week earlier I called another company. The person answering the telephone talked so fast that I couldn’t understand the name of the company or what he was saying. It was as if he was trying to get rid of me as quickly as he could.

These two stories are examples of how NOT to answer the telephone. The first impression that your customer or potential customer gets when calling is the person who answers the telephone. Make it a positive impression.

Call your company when you’re not there. Have a trusted friend call. See how the call is taken. Hopefully your company isn’t one where the telephone is answered with gibberish. You can’t understand what the person answering the telephone is saying.

Have a scripted way of answering the telephone. It doesn’t literally have to be written down (although it’s a good idea). Train everyone to say the same thing when they answer the telephone. And, train them to say it slowly and clearly.

A company started answering the telephone “It’s a great day at XXX Company. This is XXX, how may I help you?” They found out that people with problems were less angry and calmer this year as compared to last year. He felt that just by saying “it’s a great day”, i.e. a positive statement, it made people feel better. Occasionally they get asked why it’s a great day and they answer with a statement about why it’s a great day.

Everyone answering the telephone should have a message book. Many times when the person I want to speak with isn’t there, the person answering the telephone doesn’t even have a piece of paper and a pencil to write down my name and telephone number. I hear “just a minute I have to get a piece of paper”. I were a customer, I would think that my call isn’t important and therefore my business isn’t important.

Message books should have NCR paper. They shouldn’t be taken on “yellow sticky notepads.” This way, if you lose the message (and I’ve done it), then you have a written backup. Also, if you need to speak with someone a few months later, you can always find their telephone number in the archived books.

One of the things that absolutely drives me crazy is being put on terminal hold. That’s where you are waiting for someone and waiting, and waiting more. The best thing to do when someone is on hold for more than a minute is to ask whether you can take that person’s name and telephone number. Then have the proper person call her back when he gets off the telephone.

Here’s another example using an automated telephone system. An owner of one of the companies I work with was dealing with some issues that I thought that a manager at another of the companies that I work with could help him with. He said that he knew the telephone number and so I didn’t give him this person’s direct extension. So, he called the number he had for this manager. The automated attendant said “press 1 for service, press 2 for sales, etc.” He was trying to find a specific person who was not listed in the directory so he pressed 1 for service. He was put on hold for about 7 minutes (he timed it). He thought that if someone really needed service they wouldn’t wait as long as that. So, he hung up and dialed again because he really wanted to speak with this person. This time he pressed 2 for sales. The wait was 10 minutes this time…he was definitely looking at his watch. He hung up again and pressed another number and finally after two minutes someone came on the line. Would a potential customer wait that long…especially someone who was trying to give you money? I don’t think so.

If you have an automated attendant, call your company and press 1 for service, etc. and see how long it takes for someone to pick up the telephone. Do it at odd hours, first thing in the morning, lunch time, right before quitting time.You’ll get the experience of seeing your company through your customers and potential customers eyes.

A live person can easily put a called through to your voice mail. A live person who has a friendly voice at the other end of the telephone can calm an irate customer, put cheer into an otherwise stressful telephone call, etc.

If you only have automated attendants, make sure that there are instructions if the caller is calling with an emergency. If it is an emergency, the caller should be able to dial another extension to get help. In many systems, “0” for the operator is not an option. Make sure that you get a system where “0” is an option.

Your customers write your paychecks. It’s best to give them a great, positive first impression when they call your company.

Critical Business Survival Areas

There are several critical areas for business survival.  First, the customer writes your paycheck,  He pays for your salaries, your worker's compensation expenses, your rent and all of your overhead.  The most important thing to do is take care of the customer profitably. Knowing your costs allows you to charge accordingly.  And always, provide more value than cost.

The next critical area is cash flow.  This means billing and collecting for your work.  I've seen situations where the customer had to ask for the invoice...more than 30 days after the work was done.  I guess that the company had an excess of cash and didn't need the money!

After billing comes collecting.  Take time to call customers who have not paid withing 30 days. If you don't become the squeaky wheel, then you will be put at the bottom of the list.

Next, inventory.  Inventory is a bet. You don't want your hard earned dollars sitting on shelves year after year. Make sure you know how quickly your suppliers deliver, how quickly you use inventory, and get a sales projection.  That allows you to make prudent bets.

When you take care of the customer, understand the cost of doing business, bill and collect for your jobs, and make prudent inventory best, you'll control some of the most critical business survival activities.

A New Type of Business Card

One of the cheapest forms of advertising is a business card.  Most of us have the traditional name, company, address, telephone and fax number, and email address. People look at it and may keep it. However, most business cards don’t stand out.      

                                                                         

Recently I had the opportunity to test a new type of business card.  This business card tells what we do rather than who we are.  The interesting thing is when I hand two cards to a prospective customer I say, “this is who we are” to describe the first card and “this is what we do” to describe the second card.  I’ve tested this with over 100 potential customers. Invariably, people NEVER looked at the first card.  They were more interested in what we do rather than who we are.  I learned a valuable lesson.  You can apply what I learned to your company too.                              

                                 

Two things happened at once to create the “what we do” card. First, we joined a new Chamber of Commerce.  They requested a 50-word description of what we do at our company.  Try writing only 50 words.  The first draft had over 100. Frustrating! I discovered that you write it, leave it alone, read it aloud, and keep crossing out unnecessary words. Through trials and a lot of erasing I made it more and more succinct.  Finally it got down to the maximum of 50 words.

 

The second thing that happened to us was that several companies began requesting information that they could hand out to their customers about businesstvchannel.com, our Internet television station for time starved small business owners with zero to 49 employees who want to stay a step ahead of the competition. They didn’t want something big. They didn’t want a brochure.  They wanted something like a business card.  Business cards were easy to keep and distribute.  They didn’t have to “store them” someplace.                                                                              

          

The “What we do” business card was born!  If you’d like a copy, send me an email (ruthking@businesstvchannel.com) with your name and address. Yes, this has to come by snail mail so you can see and emulate what we did.                                                                               

                                                                                           

Here’s how to create it for your company:

Decide who your company is, what you stand for, the benefits it provides to customers and prospective customers, and why those benefits are important to the customer.  Write down the information. And yes, you only have 50 words.                                                                               

         

Answer the questions: What are the benefits of using your company?  Why should they care? What makes your company unique? When you start this process look at companies you admire to see how they present themselves.  Look at their websites.  Note what you like and see what you can apply to your company’s statement.                                                                                                      

       

Then, do the opposite.  Look at companies who you would never want to be like.  How do they present themselves?  What do their websites look like? This exercise should give you a place to start.                                                                                                                                  

Get input from your employees. Ask your customers why they use your company.  These are the key words that should be among your 50 words. These words are printed on one side of the business card.                                                                                                                                    

You don’t have to use two different cards.  You can use one business card. Since you have two sides to a business card, you can put this information on one side and the traditional “name, telephone number, email address, etc.” on the other side.                                                                   

Everyone should have the new cards.  Yes, they are a little more expensive to print.  However, you’ll probably get more impact and more referrals with these cards.  Try them out. When someone asks you for your card, say, this is who we are to the first side, turn it over and say, this is what we do.  I think you’ll find that people pay attention to the “What we do” rather than “Who you are”.  And, they will keep them longer.                                                                                                      

                                                                                        

Remember, business cards are one of the cheapest forms of advertising.  Make yours different and unique.  It should help you generate word of mouth advertising and more sales. Then, once the cards are printed have a goal to distribute at least 500 per year.

Volume is Vanity - Profits are Sanity

Which do you want?  Sales volume or profits?

I’d rather have the profits and I’m sure you would too.  It strikes me as strange that we reward sales volume…many times without rewarding the bottom line. 

How many plaques, medals, and awards are given for the highest sales volume for an individual, team, or company?  How many incentive programs are given for the person or people with the highest sales?  Thousands.

Do you know of any awards that are publicized and given to the person, team, or company with the highest profit?  I don’t.  If you do, email me (ruthking@businesstvchannel.com) and let me know so I can write about them!

One of your goals this year might be to keep the same level of sales and increase profitability by 5%.  Increasing your bottom line will take work.  It is much easier to increase sales…the simplest way is to just raise prices.

What if an increase in sales price is justified?  Insurance rates have risen, your employees want raises, gasoline prices are out of sight.  These do justify increases in selling prices.  However, a new competitor is in your market with lower prices…and they are backed up by years of experience in other markets and a cash war chest. In other words, they are buying their customer base and have targeted your customers.  Yes, they will increase their prices once their base has been established.  However, this won’t happen for at least two years.  What do you do?

First, you have to sell your company’s services.  Remind your customers that you get what you pay for and that to provide the quality service that is expected, extremely low prices are not justified.  They have to make it up somewhere.

Second, look at increasing productivity for the same level of sales.  This means that even though you have experienced increasing salaries, gasoline prices, insurance, etc. you do not have the option of increasing prices. You must increase productivity.

For those of you who have the luxury of prices and productivity increases, your bottom line should look wonderful at the end of this year.

Remember, volume is vanity, profits are sanity.  Make sure that your business is sane.

Do You Have the Mercedes Benz Syndrome?

A colleague had an acquaintance who was looking for funding for his business.  My colleague introduced him to a potential investor at lunch.  The next day the investor called my colleague and told him that the person was nice but he would never invest in his business.  My colleague asked why.  The investor said that he had the “Mercedes Benz syndrome”.

“What’s that?” asked my colleague.  The investor explained that during the conversation at lunch he found out that this person was funding a $2200 Porsche lease through the business.  He appeared interested in having the business pay for his personal lifestyle.  The investor explained to my colleague that his money was not going to pay for a car lease.  His investments were supposed to help grow the business; not the owner’s personal “finer things of life”.  He went on to explain that he called this the “Mercedes Benz syndrome” where the business pays for unnecessary personal assets, i.e. the owner’s “Mercedes Benz”. Investment that is supposed to go towards the business’ needs goes towards the owner’s personal needs.

It struck me that a lot of business owners do this too.  I know some. You probably know some.  These are the owners who don’t understand that cash does not mean profits and that having cash does not mean that you have to spend it.  These are the owners who use the business cash to buy boats, have the company pay for expensive trucks and cars, write off vacations, build an expensive home, have a non-working relative on the payroll, etc. Instead of investing in the business, they invest in themselves.

Don’t get me wrong.  There is absolutely nothing wrong with enjoying the fruits of your labor.  However, you can’t do it at the expense of your business.  You have to save cash for the downturns. You have to save “for a rainy day”. 

Sometimes you have to save for years. A company I know had ten years of 15% or more net profits before taxes.  During this time, they did not take a lot of money out of the business.  They paid modest bonuses but invested back in the business. This year work decreased dramatically and they had to lay off people.  However, they survived this downturn and are seeing an upturn again…nine months later. They had the cash to survive. Ten years of savings gave them the cash they needed to fund operations when it was very slow. 

Another company had 10 good years too.  The owners of this company took everything out of it they could and spent it…on second homes, expensive vacations, and the finer things of life. The economy tanked in their geographic location too…and they are scrambling. They are on COD everywhere, vendors are calling, their line of credit for several million dollars is tapped, and they barely scrape by to pay payroll each week.  The attention that they should be paying to generating additional work is being spent on credit and collections issues. They readily admit that they didn’t invest back in the business and it is now hurting.

So how do you avoid the Mercedes Benz syndrome?  You make sure that you are earning enough on your jobs and service work to generate reasonable profits and you save some of the money you generate from collections.  You can actually save relatively painlessly.  Save 1% of every check that comes in the door. That means if your deposits for the week total $1,000 you write a check into a savings account for $10.  You’ll never miss the $10.  And, that $10 will start earning interest.

This is not difficult to do.  However, it does take discipline to do. Many company owners have their bookkeepers perform these activities and check up to ensure that they are done.

How much should you save? This is totally up to you.  It depends on whether your company has a line of credit.  If you have a line of credit and it isn’t used, that can be a form of emergency cash.  However, even with that safety net, many owners like to have at least two to three months overhead expenses saved.  Others have the value of at least six weeks payroll and payroll taxes in the bank at any moment. Their reasoning is that if nothing came in the door in terms of work, then they could at least pay their people for a reasonable time. You’ll need some savings that are fairly liquid, i.e. you can turn them into cash quickly. Other savings could be more long term which probably will earn more interest.

Hopefully you don’t have the “Mercedes Benz syndrome”.  Good profits and savings will  prevent you from a financial hardship in years to come.