By the numbers

Business is a game.  Having a company involves passion and emotion at least until you run out of money.  Then you realize that you lost the game. 

A game like business is only slightly more complicated than Monopoly and the only major difference is that you don’t have to roll the dice or take a chance on Chance.  Essentially, though, the winner has the best bank account at the end.

Of COURSE I’m being simplistic.  After all, some people don’t care about money or share their money or give it all away.  The thing is, winning or losing in business all has to do with some form of currency.  Those who have more than they owe survive.  And those who owe more than they have eventually close.  There are no exceptions. 

I know that deep down in their soft hearts, entrepreneurs are aware that the game must be played out.  Bills have to be paid.  It does not matter one bit whether the entrepreneur cares about money or doesn’t.  The game of business doesn’t care any more than the sun cares whether it will rise or fall.  Personal greed has nothing to do with the game.  As long as there is more money than bills, you’re a winner. 

I am dismayed by the huge number of people, both individuals and entrepreneurs with any number of employees, who have no idea what their financial statements look like.  They don’t know how much cash they have in the banks.  One client told me that he had no idea what was being deposited to his bank account by one of his customers but that he trusted them to pay what he was billing.  Turned out they weren’t by the way.

Ask any couple about their bills or finances and at least one, if not both, will say that they ‘aren’t good with money/finances/bank accounts/credit cards’ so we should ask their partner.  And why?  ‘Aren’t GOOD?’  How hard do you have to study in order to remember that you carry a checkbook and that your bank balance is written on the ledger inside?  If you pay mortgage payments or rent, that’s probably a large sum of money each month.  How come you don’t know at least ABOUT how much it is? 

I’m a little bit nerdier than most when it comes to finances.  I measure my current ratio, my quick ratio and my D-E.  I manage my business through a combination of financial projections and cash flow reports.  I balance the bank accounts daily and pay payables the same, right when they hit thirty days for the most part.  I have receivables on a short leash and spend time reviewing delinquents at least once a week.  Really, it’s all kind of fun, at least for me.

To avoid doing any of this is to begin traveling the short road to an out-of-business sign.  Anyone who has a business has to know the difference between ‘cleared balance’ and ‘checkbook balance’ in their checking account.  I imagine at least one of my pair of followers is shaking your head right now.  “Who doesn’t know that?” you are asking.  How about the difference between profit and revenue?  I have a close friend who has a business and who doesn’t know the difference.  He struggles along, by the way, only because he is an expert of the highest degree in his trade. 

 Yes, this is a rant.  I spent time this past week ranting about the very same thing to my management staff.  I called it “A Learning Moment” and told them to all balance their checking accounts.  I think they giggled at me behind my back. 

And I don’t care.  Time to start closing the month of October.  It is the 30^th and I need to be done by November 3^rd.  Yup, just bragging.  

The only constant

I have been in the embroidery business for twenty three years.  I learned an awful lot during the first few years, both about doing embroidery and about the design process.  As time moved on, I started seeing consistencies both in the nature of the embroidery being done and in the requests made by clients.  Eventually, there was very little that I hadn’t seen and I became an ‘expert’ in the industry. 

Malcolm Gladwell and others have written about the time that it takes to get good at something.  Gladwell says that 10,000 hours are needed to become good in “Outliers: The Story of Success” (2008, Little, Brown and Company).  That is the equivalent of around five years of practice if a skill is practice full time.  I had a lot of hands-on machine and design work and got pretty darned good at it. 

Experience is important in the development of expertise.  That probably happens because both words start with “ex”.  Experience teaches you that there is an upper limit to the number of times that the phrase ‘Wow, I’ve never seen THAT before’ can be used.  Eventually, everything begins to relate and experience steps in with ready solutions.

After a time, we Experts become a little bit complacent and arrogant.  Over the past two decades, I have already tried most of, if not all of, the various materials and tools of our trade.  Newbies that enter the business and who want to talk about all the really great thread colors, the self-inserting needles, the magic hoops that automatically align when you throw the laser on them, and all of the other items designed to slow you down while putting money in someone else’s pocket have already been out there.  Some things work and most don’t.

Experts, though, can become close-minded. 

The fact is, everything around us changes.  Expertise is only good if it is current.  I’ve had to learn that and re-learn it so many times now that when someone says, “I will rely on your expertise to choose the colors for this design”, I cringe.  The converse is, when I learn something new these days, it becomes a grand victory.  It means that, for at least a short time, I know something that maybe someone else doesn’t know. 

I have to be careful these days.  I am too willing to say “It can’t be done” or “We don’t do that” and I’ve learned that things have changed so that maybe we CAN do that.  There actually are ways to reduce the puckering in a design placed on a lycra-laced nylon fabric (going all technical on you now).  And here I just assumed that it was not possible because, after all, embroidery is always embroidery. 

My job keeps changing, too.  The current position that I hold is that of policy-writer and enforcer.  This means that I am ultimately responsible for the development of internal working systems and then of distributing them to our staff.  That is, by the way, something called management.  I have absolutely no idea what I am doing most of the time, so things have changed once again. 

It’s time to go back to work again.  I need another 9,287 hours in order to become an expert at this new job.  

Desire

But I want to.  I really really want to.

It’s time for another horse analogy and a short trip down Human Nature Lane.  An applicant for a position reinforced two really good lessons involving both horses AND human nature, or more specifically, desire.

Recently a key employee gave notice.  It doesn’t happen often and we are always surprised when this happens.  Our standard procedure, only standard because we haven’t thought of a better way, is to put an ad online and wait for the resumes to pour in.  We cull the resumes and call a select few applicants to set up interviews. We do a first interview and then request a second one for the really qualified folks.  

Our first interviewee was just about too good to be true.  His sincerity was overwhelming.  His answers to some tough questions were nearly perfect.  He left the interview with a warm handshake and the words, “I really want to work here.”  We were thoroughly convinced of his desire.  Only other person out of five or six was actually close in qualifications and he lacked the enthusiasm. 

We requested a second and final interview for the two qualified candidates.  The second one cancelled because he received another offer, so the only person we saw was the very first applicant.  Once again he was warm, sincere, honest, interested.  He gave us references that all gave him a glowing report, and that afternoon we offered him the job.  Since he was currently not employed, he said that he could start right away, just as soon as he finished up a couple of side landscape projects.  He told us that he couldn’t wait to start, though.  We set a time of nine a.m. two days from the acceptance date.  He was so excited that it was infectious.

On the first day of work, he arrived on time.  He was, he said, still involved in a landscape project and would it be at all possible if he postponed for a day.  I was concerned and at the same time glad that he was so dedicated to a project that he would actually want to finish it.  After all, so many people just walk away from the job.  This guy was impressive.  He said that this would be it and he’d be back the following day at nine.  He really, really wanted to work for us and he was so excited about the job. 

Nine o’clock the following morning we received a phone call.  He was still finishing.  The job took longer than expected.  He’d be in by eleven.  And at quarter after eleven, yet another phone call.  This time, he explained that he had to clean up and that it would take an hour.  After that, he would for sure be in.  And he was really (times three) looking forward to the job.

I rescinded the offer.  Wanting to do something just isn’t the same as doing. 

On to horse stuff. 

Horses like to make us wait on them.  They know that we’ll walk to them with their grain, their hay, their saddles.  We walk to them because we love them.  Horses stand there and take all of this attention in.  We think that they love us back.

Truth is, non-moving horses are demonstrating dominance.  Whomever moves first in the horse world loses.  If you want a horse to respect you (and believe me, you do want their respect because they outweigh you by oh, several hundred pounds and they have these nasty hooves and teeth that will hurt), then the first rule you learn is to make them come to you.  After all, you make your dog come to you and he is your best friend.  Your cat makes you go to him and he is therefore not your best friend.  Your cat, in fact, dominates the world and treats people as if they were the pets, not the cats.

People work the same.  They are subtle.  They use waiting in order to create fear, subservience and outright domination over others.  I refer you to our wannabe employee.  He wanted so badly to work for us.  He postponed his first day three times.  The reason that I broke off our relationship was not because he had to put us off.  It was because he made us wait.  He would have had the upper hand and we would never have been in control.

Look around the next time that you are late to a party.  Check to see who is last to a business meeting.  Who is in charge?  Does the meeting start without the last attendee or does it wait?  Who is actually in charge?

What I learned here was that I am no longer willing to be place on the waiting list.   Show up, don’t just want to be here and be on time.  We’ll get along just fine that way.

The road to perfection

About three years ago, I asked my management staff for help in defining our ideal customer.  This was done for marketing purposes.  The more we knew about our customers and about the ones with whom we identified most strongly, the better we could target our marketing. 

This year our growth rate has been phenomenal in comparison to prior years.  We have acquired several new customers and we have seen sales increases for some of our existing clients.  The job of completing these orders on time and accurately has become more difficult these days, especially since we are often at one hundred percent production capacity.  While this is an ideal situation from a profitability standpoint, it is not such a great thing for our staff.  They work very hard and the stress of meeting ever more pressing deadlines is getting to them. 

You learn many things when you reach capacity.   You can’t really increase individual production very much if you have a motivated crew.  The jobs of the production crew don’t change a whole lot; they just get to work more hours if they choose.  Most of them are happy with the extra income, especially during periods that were previously pretty slow.

The biggest allotment of stress drops onto the workflow management staff.  They are the ones who have to prepare the orders to be done, make them absolutely clear for the embroiderers and make sure that the product is processed smoothly from the time we receive the order until the apparel is delivered to the customer.

In stressful and rushed situations, some orders are much easier to process than others.  This leads us back to our ideal customers.  It turns out that the majority of the easy processing orders come from our previously identified ‘ideal’ customers.  Fancy that!  The process works not only for identifying a market.  It also provides pretty good feedback as to who is going to be the easiest to work with.

What, you may ask, makes our ideal customer?   We worked on the definition for a long time and I’ll try to parse the whole idea into a few specific statements.

1)      Our ideal customer understands what we do and does not continually ask for us to stretch beyond our limitations.  This applies to rush orders and design work.  We do embroidery, not sewing.

2)      Rush orders are often a sign of disorganization.  Either the customer forgot to order (quite often the case) or they have not yet trained their client to order on time.  Constant rush orders eventually get messed up.  That costs us time and money.   Our best customers provide us with fewer rush orders. 

3)      Customers pay us on time.  They understand that this is a business relationship and are not so arrogant as to assume that we appreciate being blessed with their orders.  In fact, the harder it is to collect, the more resentful I get.  Yes, it is a personal thing.  I have employees who need to pay their bills.  They also do very good work.  It is insulting that a client would not pay for the service that we provide. 

4)      If a customer learns on the job, they are our kind of folks.  We don’t expect anyone to be perfect.  We also don’t expect to answer the same questions every single time the client calls us. 
Last month a client sent artwork to us, along with a purchase order.  I had the artwork converted to embroidery and was told that the whole design was wrong.  It turns out that the customer has defined standards for the logos and among them are specific guidelines for size, what is to be included, and the colors that are to be used.  Later still, we received a sample (after I had set up the design).  Even later, we were given a completely different size for the logo.  Had the customer asked the right questions in the beginning, neither my time nor his would have been wasted.  As it stands, though, we were able to discuss the problems and he let me know that he’d be asking for samples and guidelines in the beginning next time.

5)      Orders are organized and easy to read.  That’s pretty easy to understand.  It certainly helps the receiving staff and finishing department to count things in and out when we know what we’re supposed to have. 

That’s a list of some of the more important features of our ideal customers.

If we get famous and go global, would it be awful if I were to do a best/worst list and publish it?  Number 1 Perfect Client of the Year?  Or maybe I can put a sign on the door:

No solicitors.  Only ideal customers allowed to enter these premises.  

Just say no

Our business is growing at a record rate this year.  I am surprised by the increase in sales and, being a typical entrepreneur, I have one single question.  “Did they dial the wrong number?”

After all, we are apparently an overnight success, 23 years in the making.  I really have a hard time accepting that the ship of our embroidery is finally arriving at port.  We have worked through too many years of ‘Maybe next year’ and it is very difficult to accept that maybe it is This Year.  I certainly don’t want to grab the champagne just yet. 

One thing I have grabbed is my pencil and paper (figuratively since I can’t really write by hand any more).  I have carefully analyzed changes that we have made during the past few years in order to see what might have encouraged this growth.  Knowledge always increases one’s chances for future success, you know. 

The results are now in.  While we have had some wonderful processing systems in place that help to get orders in, apparel decorated and then sent to the right place on time, one thing has changed this year.

It is the first year that we have said ‘No’. 

We said no to holding pricing for several companies who have done far less business than they originally promised.  Those companies received price increases.  We said no to customers who could not get their orders together in a reasonable amount of time because it was obvious that they themselves were doing a terrible job of organizing them.  Not only do they want for us to do their paperwork and verifying, in some cases they look to us to do their selling. 

We said no to customers who didn’t pay on time, who called us with changes from the day that they presented the order until the day that the order was run.  We said no to rush jobs provided by customers who chronically ask for rush jobs.  These people are the first to throw us under the avalanche when mistakes are made. 

We spent time saying no to customers who absorbed huge amounts of time and did very little business with us.  This gave us time to work with customers who needed advice in order to sell.  We were able to make logo recommendations in greater detail and even make some changes in our processes because we found the time to do so.  As a result, the good customers increased their sales way more than the, well, less-good customers lost sales. 

This sounds really simple.  It is really simple.  Obviously it works.  The judicious use of the word ‘No’ can do wonders. 

The long hours that we have spent developing systems that focus on service and quality actually enabled us to define the word No in a proper and useful manner.  The fact that our systems actually told us that we were having our lives wasted by some individuals completely justifies the use of the systems.

I know what you’re thinking.  It isn’t fair to turn away a potential customer.  They might be the ones who stumble onto the gold mine and make us all rich.  There are many rumors and unsubstantiated claims to that effect.  In truth, though, I have had far fewer days that ended in total frustration and tension because a client ‘forgot to mention’ that the tagline didn’t belong on the shirts and would we mind just removing the stitches, make the shirts look like they hadn’t been sewn and buy new shirts to replace the ones that WE damaged. 

Just remember.  If someone shows up at your doorstep and complains about some company that turned them away and they don’t know why, blame it on me.  I don’t mind.  Our sales just went up.

But they said it was real!

Paul Offit, M.D. wrote a fascinating book, Do You Believe in Magic?, about the alternative medicine industry and the many snake oil salesmen that participate in it.  I find it incredible that people will buy alternative medicine cures even when they are proven to have no value.  The old adage that ‘There’s a sucker in every crowd’ seems to have become ‘Every crowd consists of suckers’.  

Everyone wants an ‘Easy Button’.  They want to lose weight by taking a pill or have their stomach stapled.  People want to be healthy and live forever.  There’s a juice drink for that.  There is a cure for cancer hidden in the special vitamins made of ‘ancient herbs’.  We are told that the ancients all had incredible secrets to long life.  Strangely, their lives weren’t any longer than ours are today.  They weren’t a whole lot shorter, either, so it’s anyone’s guess as to whether Ancient Medicine had anything to do with current lifespans.

Oh, as an aside, the reason that average life expectancies were, in fact, much lower in ancient times had to do with the high infant and early mortality rates from disease, lack of sanitary conditions, lack of adequate, yes we shall mention it, medical procedures.  The same is true today in, say, Swaziland and Sierra Leone where poverty and very high infant mortality due to poor medical services affect overall life expectancy.

Dr. Offit proposed that once ‘alternative’ medicine becomes scientifically proven to work, through valid procedures and experimentation, it becomes part of the ‘modern’ medicine world.  Any sort of anecdotal proof, no matter how loudly claimed, will never be enough to force a product to work. 

Recently a friend and supplier sent me a note with an email blast advertisement attached.  She thought that I would find it interesting.  The customer claimed to take the guesswork out of calculating embroidery costs by producing a table with a standard price for ‘up to 10,000 stitches’.  My first reaction was to panic because I saw that their prices seem lower than ours.  Then I looked at all the detailed promises that they made regarding timely delivery, free freight and so forth. 

In my experience, the louder one shouts about superior and/or free service, the less attention I should give to their claims.  If a vendor claims to be ‘World’s Greatest Innovator’ I probably will look elsewhere for innovation.  If they have to tell me that they give fabulous service, I’ll look for it and be hypercritical if they fail in any small way.  If they have to sport their prices in a big way and tell me that they are low, I’m going to look for the sneaky add-ons because I know where their real costs have to be.  “Oh, you wanted real thread on that logo?  We charge extra for that.  Otherwise, you get our patented invisible logo thread.”

I don’t know if the advertising is working for my competitor.  People are definitely accustomed to hearing claims to service and quality and we are not at all immune to unsubstantiated representations of the magic pill.  After all, four out of five dentists [to whom we gave an entire case of the stuff] recommend beet-juice for brushing.  And things really do go better with fishnet stockings.  Or something like that.  It’s all in the catchy rhythm.

Anecdotal evidence is what advertising is all about.  Even before reading Dr. Offit’s book, I was skeptical.  Now at least I have a reference point from which to direct my questioning eye. 

On the other hand, maybe there is a real magic pill.  I think it’s time to go hunting for one.  

Our Generous Entitlement Programs

This chapter is about customer service.  I will be using words like Conservative and Liberal.  Please don’t get lost in those words, though.  They just help explain the opening paragraphs. 

I write letters to members of the state and federal congress.  I might be considered ‘that old guy who writes cranky letters’.  There is one in every neighborhood. 

A number of my letters have gone to our small rural district’s state representative.  He is conservative.  So am I.  We discuss spending and not spending.  One exchange, made during a recent liberal legislature, concluded with my proposal that I create my own five acre country.  Our rep asked if I would allow immigrants.  I replied that perhaps we would.  His response was that he was thrilled because he wanted to move in and take advantage of our generous entitlement programs.

No, I have not formed my own country at this time.  I also have not considered generous entitlement programs.  Since that exchange, though, I have become very aware of the difference between Entitlement and Earned Right. 

Many of our customers feel that they are entitled to great service.  I believe that this is an earned right.  We have, for instance, had this discussion with a client who had a few problems with timely payment.  The conversation ultimately ended with a parting of ways. 

When he first came to us, he asked for a very fast turnaround on his work.  He was a clothing manufacturer and since all of his apparel was U.S. custom-made, we were the last to see the garments and they were always associated with a show deadline.  Things had to be done in a hurry.  We understood and complied.  Aside from that, since they were U.S. made, he had to keep his prices in line, meaning that every dime was important and he requested that we charge low set rates.  We supported him, and charged very low prices for the work in order to help him out.  His offer originally was that he would pay us when he picked up the goods.  He also claimed that he was looking for a single decorator (at the time he was using three) and that he had a substantial amount of work to bring us.  The agreement was considered a fair exchange.

This worked well for a few months.  Then one day, he asked that we give him credit for half the cost of one of his jobs.  He would pay us within fifteen days for the balance.  From that day forward, he assumed that he had credit and stopped paying us for each job.  At first, we lived with the arrangement because he never went out more than thirty days.  Then, slowly, the length of time increased.  The work slowed as well even though when he did bring in jobs, he still had a very short turnaround, satisfying his own needs and yet never offering anything back.  The working arrangement deteriorated and even though we always complied with his needs, we were never rewarded for the effort, either in timely payment or in additional work.  Finally, I had the conversation with him, asking him why he felt entitled to receive the service when he wasn’t keeping up his end of the agreement that was in place.  His response was that we should be happy because he was bringing us work, after all. 

Our agreement no longer was based on Earned Rights.  It had become an entitlement program.  We gave, he received and the street that we rode together was going one way.  Finally, when he had paid a significant portion of several past-due invoices, I wrote him a letter requesting that he no longer provide us with work.  The effort to collect, the frustration that we felt and the constant need to scramble to get his jobs done all combined to create an uncomfortable situation.  I wrote off the balance that he owed us. 

Entitlement does not create value.  Any working relationship, whether it is a friendship, a business relationship or a government-to-citizens type requires an equal exchange of value in order to make it work.  The relationship must be earned or it generates resentment, distrust and an eventual breakdown in the services agreed upon. 

Sadly, I will have to deny entitlement programs when the time comes to form my new country.  This will, of course, limit the immigration requests.  It will, though, comprise a much more involved citizenry.  If you’re interested in mucking and gardening, I will happily consider providing meals and wine.  Welcome to Littlestan.