Corrections or additions?
These articles by Barbara Fox and others were
prepared for the January 3,
2001 edition of U.S. 1 Newspaper. All rights reserved.
Picture yourself in the desert," says G. Michael
Moebs of Moebs Services in Chicago. "You haven’t had water
for two days and in another 24 hours you will be dead. But you find
a well, and attached to it is a bottle of water with a note: Don’t
drink this water. Use the bottle to prime the pump."
Expense control, says Moebs, is using the water to prime the pump.
And if the bears on Wall Street prevail, as many fear they will, the
year 2001 will see some belt tightening and expense cutting. Moebs
specializes in this. An alumnus of the University of Illinois at
Class of 1969, he was a student of George Stigler and Milton Friedman
at the University of Chicago (www.moebs.com).
Moebs usually consults to bankers (and he gives a workshop,
Control & Fees for CEOs, CFOs, and COS," on February 14 for the
New Jersey Bankers Association), but his hardhitting "Eleven Ways
to Control Expenses" can help any kind of organization slash their
probably the hardest of all the steps," says Moebs. His favorite
story about commitment concerns the octogenarian owner of the most
profitable bank in Illinois. He motivated his employees to cut
by turning off electric lights when they left a room.
Home Depot, for instance, posts signs proclaiming the name of
not expense to revenue ratios. If you use revenues as the benchmark,
expenses will seem to loom larger when your profits dwindle, when
actually they may have remained the same.
can change in six months, such as clerical salaries), long term
(what can change in a year, such as computer services, rent, and
interest) and "that which you can’t control."
look at the top 20 percent of your short-term controllables. Monthly,
look at the top 20 percent of long-term controllables. Quarterly,
pay attention to the short-term controllables in the lower 80 percent.
Semi-annually, the long-term controllables in the lower 80 percent.
Annually, look at the "uncontrollables."
but emphasize the good. "Often, every business is good at
one category, but they don’t take the skills or technology or tools
that they use on the good thing and apply it to the bad things."
For instance, find out why you really control "salary
for controlling expenses.
For the New Jersey Bankers Association on Valentine’s Day, Wednesday,
February 14, at 9:30 a.m. at the Eatontown Sheraton, Moebs’ workshop
will include topics of particular interest to bankers: how to double
fee income for consumer checking, how to adjust the pricing triad
(fees vs rates vs balances) and how to reduce fees and increase the
bottom line. Cost: $300. Call 609-924-5550.
Says Moebs: "People who make it to the Superbowl don’t make it
on scoring touchdowns, but on keeping other people from scoring
Faithful customers? Or repeat offenders? If at the end
of the day, your customers don’t pay, they may be bleeding your
slowly, says Steve Douglass, district sales manager for ABC
Companies, a Pennsylvania-based commercial collection agency (January
12, 2000). "If a customer thinks that they can get away without
paying, they will," he says.
The danger in this: as debt ages, says Douglass, the chance of
the full amount goes down exponentially. Experts say that a business
owner is likely to collect only 72 cents on a debt of $1 after 90
days. After 6 months, the business owner will probably only see 50
cents of that original $1.
Effect on the bottom line? "If a business operates at a net profit
of 3 percent," says Douglass, "to offset an actual loss of
$50 it has to make an additional sale of over $1,600."
Even small businesses need credit and risk analysis, says Douglass:
over the receivables and determine what your temperature is for
he says, "and how much is an average credit line for your
The customers that represent over 5 or 10 percent of your profits
— those you might be willing to take some loss on."
has to go with the first invoice," he says. "If you’re trying
to play catch up, you’re losing time and money."
At the top of Allen M. Silk’s list of the "Six
Sins" for business is dumping all your life’s savings into your
business. "That’s like investing in one stock," says Silk,
an attorney for Stark & Stark on Lenox Drive (www.stark-stark.com,
U.S. 1, April 19). "Then the business starts to take a bad turn,
and all your eggs are in one basket."
Not only do small business owners make the mistake of not diversifying
their assets, some leave too many loose ends in relation to business
partners and, in the case of family businesses, successors, says Silk.
If a buy-sell agreement becomes outdated, for example, and there’s
an unexpected death, the business could be sold out from underneath
the partner for a fraction of what it’s worth. Likewise, a business
could die out if a successor is not named.
Silk’s advice for small business owners:
Borrow more. Invest outside of the company.
a premature death, and they’re dealing with a document that’s 15 years
old, the company is not at the same value," he says. "Law
suits begin at that point."
just put a dollar amount on the company because it was worth very
little when they entered into the contract with the partner,"
the father coming to the son and saying I want you take over the
and he doesn’t want to do it," he says. "People wait a long
time when there’s a child or successor to be groomed, and they wait
until it’s too late. Or a parent who is running the business never
chooses the successor and it creates a war in the company."
says Silk. "People believe they really can’t plan because the
IRS changes their rules," he says. "The IRS doesn’t want you
to plan because as a default all the money goes to them. If there’s
a premature death, the IRS or state of New Jersey gets the lion’s
share of the assets."
Fast growing companies: Don’t take your planning a year
at a time, says Neil F. Budde, vice president, editor, and publisher
of WSJ.com, the Wall Street Journal Online, which draws from 6,000
newspapers, magazines, and business news sources, plus customized
stock portfolios that monitor stocks and cash in 57 currencies.
"If every year you say you are going to add 20 percent growth,
it doesn’t necessarily provoke you to rethink your organization, your
structure, and your systems for communication," says Budde (U.S.
1, June 21). He has hands-on-practice at starting a business inside
a large organization and growing it to several hundred workers.
Laying the groundwork for good infrastructure might involve these
and the mission, what you are working on now, and how it fits with
the overall picture. "Before, we had someone in every group who
was there from the earliest days, and there was a natural sharing
of knowledge, ideas, and ethics," says Budde, but a growing
loses this shared set of experiences.
the scrutiny of Wall Street. "To some extent, the constraints
are self imposed," says Budde, "but at some point expenditures
could start to hurt the bottom line of the company."
employers comes when dot.com companies dangle stock options in front
of their employees. Address it through compensation and packages or
even set up a separate "tracking stock" that could reflect
the upside or the downside of its dot.com businesses.
they are working for something exciting and challenging, a business
that is going somewhere.
Today’s high-tech corporations can churn out
innovation at a rapid clip by using The "Seven Rules for
by Lee Davenport, the research director for General Telephone and
Electronics (U.S. 1, May 17). These rules are invoked by Robert
Buderi, author of "Engines of Tomorrow: How the World’s Best
Companies Are Using Their Research Labs to Win the Future." Among
job difficulty, or loyalty. You must expect your R&D people to produce
and reward them accordingly.
break them into shorter segments, with measurable goals at each phase.
advance, increase, investigate, study, explore. All are immeasurable.
truly unique ideas. Encourage them.
who understand technology, explain it clearly, and can push ideas
through corporate barriers. These traits typically elude top
not increase even one year per annum. In a high tech lab, a nice
is under 35.
Don Blohowiak offers a refreshingly simple piece of
wisdom: Focus, he says. "It’s really that simple and that
says Blohowiak, a management consultant, author of six successful
management books, and founder of Princeton Junction-based Lead Well
Consulting (U.S. 1, January 12, 2000). "Remember the guy on the
Ed Sullivan show who used to spin plates on a stick? The thing with
businesses is they try to keep more and more plates spinning, and
to torture the metaphor, some of those plates are worth 10 cents,
and some are worth $10 million, and you have to figure out which is
Sifting through the endless amounts of information and deciding what’s
relevant — that will be the essential challenge for businesses
in the Information Age, says Blohowiak. "I give seminars and in
every audience I find a universal: I ask if they have information
piled up in a corner, trade journals or whatever, and they smile and
titter because we all have that. We have an abundance of information
— newspapers, magazines, flyers — and then add the Internet
to that mix."
To sift through, distill, and make sense of that information requires
time — more time than many managers feel comfortable with at
says Blohowiak. "We’re moving at Internet speed," he says.
"Things change really fast and consumer expectations have
it up. That spins out into how you hire, train, and compensate people.
It’s hard for our organizations to gratify instantly. I joke that
we’ve become the instant gratification nation."
If time management was the catch phrase of the ’90s, then the mantra
of this decade would be "energy" management, says Blohowiak.
"The challenge is going to think about work priorities in a
way," he says, "not just managing time, but managing your
Other things executives can do to get their businesses in shape:
Blohowiak, "sifting through the many channels and the sheer volume
of information to decipher what’s important, truly new, and what’s
hints of this now, but I think it will be more broadly adopted,
technical skill is so quickly outdated anyway, and the capacity to
learn and predisposition to serving others is so important to an
he says. "It’s the whole human being that comes to work everyday.
We’re going to push people — long hours are a given now —
but they are also intense hours. I hear people say that there’s no
down time. The real you will come bubbling out in those
to tend to those who are doing good things and pull weeds, so that
we can grow the business in the right way," says Blohowiak.
have real frustrations that they have the wrong people doing the job
and they’re afraid to make the decisions they need to. We can’t carry
people who are unproductive or underproductive. Too much time is taken
retrofitting people; too many managers end up on the treadmill to
mediocrity by spending too much time with people who aren’t going
to be able to do what needs to be done."
eventually, the business as a whole. "Good performers get more
and more heaped on them," says Blohowiak. "Managers must have
the best people around them with the support and tools to do great
work." Simple advice for a complicated world.
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