The mainstream media (it is supposedly liberal, remember) spent last week overdosing on sweets without first eating dinner. We have been told, repeatedly, that burdensome union contracts led to the (allegedly) untimely death of Hostess. Throughout America, decent and hard working non-union folks shook their heads at the foolishness of those greedy bakers who refused the new contract unilaterally shoved down their throats by a bankruptcy court.
They were greedy, they were inflexible, they have paid with their jobs. And now we Americans, the hard-working non-union types at least, are denied the Ding Dongs that are rightly ours. It is a dark day America, and exactly what many were expecting when President Obama was reelected. They don’t, after all, have Twinkies in Marxist Kenya.
Sure. In other news, Donald Trump has bankrupted three firms, but is still a good businessman.
The great tragedy of environmentalism and sustainability, is the politicization of the two subjects over the last three decades. The Big Spill is only the latest example of our broken two party system’s approach to problem-solving in the environmental realm. Split into factions, our Congress and media have found it convenient to be pro-B.P. or pro-everything else. Very few in politics, either in the committee rooms or in front of the cameras, seem to be pro-solution any more.
But what is sustainability really? Is it a part of some communist conspiracy, is it a bad idea by well-meaning but naive environmentalists, or is it the future of good business? For years, U.S. business theory has been grounded in the teaching that earning profit is the number one moral responsibility of any business. The notion has been part and parcel of business school teaching for decades, and is ingrained in the mindsets of most of today’s top managers. Increasing shareholder value is the mantra that is still preached in schools and lower level management meetings across America. At first blush, it would appear that changing that mindset is an impossible task; but there is a common ground emerging.
Sustainability is one of those “of the moment” catchphrases that tends to mean radically different things to different people. To old school environmental warriors, sustainability is watered down environmentalism for wimps; for many pro-business types, the concept is an insidious “fifth column” of environmental activism. My take on the idea is somewhat different; as someone who grew up with National Geographic and Carl Sagan as guides, but matured as an adult in the business school of hard knocks, sustainability is environmentalism all grown up.
The basic idea of sustainability applies to businesses at every level; handle operations, marketing, and human resources in a manner which ensures the greatest sustainable benefit to your business, your customers, and your community. To all businesses, the simple approach involves looking at everything you do over the long term. The challenge for small businesses, in the minds of many, is the scale of short term costs relative to the business. In reality the fear of the costs relating to sustainability has almost no basis in fact; it is change that small business owners really fear, change in a model that has served them well.
The $100 college title for what a business does is “core competency”. Every business that gets off the ground has one or more competencies that are at the heart of what they do. Most businesses that fail forget what those competencies are. What we are talking about is an identity crisis in your business. The rules are simple; know your business, know your customer, know your people.
When you set out on that exciting and dangerous adventure that is business ownership, the first question that should be asked is, “What can I bring to market that customers need or want?” Not surprisingly, the first question asked is one that should be revisited EVERY time a business thinks of adding or expanding. An owner of an espresso shop might easily add bought in pastry to his/her product mix; that same owner would do well to pause before carving out a full kitchen on premise or trying to sell DVD’s.
While it seems simple, the idea that a business should have the products their customers want, when they want them, and in whatever quantity they desire is often lost in the swirl of running your own company. Many of us were raised with an ethic that waste is bad, while some of us were raised with the notion that plenty is a sign of success. When I walk into many small businesses today, I am most often confronted by a massive assortment of goods that don’t sell (recognized by the dust they accrue), in combination with empty shelves were the store’s best items live.
There are two simple laws that must be recognized when managing your inventory; inventory costs money over an above what you buy it for, and being out of stock on items in your firm’s top 20% is a sin of the highest order. This two laws may seem to be contradictory, but an owner or manager can use them to his/her advantage by following a few simple guidelines. What I call the seven secrets of inventory management are posted after the break.
Most folks thinking about starting a business have heard that a third of all new ventures fail inside of two years. The conventional wisdom includes the advice that prospective entrapreneurs have two to three years worth of operational cash on hand prior to taking the plunge. What is not often discussed is the concept of the cash budget; this failure to discuss is a primary mover behind business failures.
The cash budget is different from the common idea of a budget in that cash inflows (revenue) and cash outflows (expenses) are considered in the context of time. The most dangerous budgetary step an owner can take is to consider expenses and sales on the basis of monthly averages derived from annual totals. All sales are not equal; most businesses have a seasonal component to them, and the differences in when cash comes into the till creates artificial shortfalls in a business plan.