In this next part of the series: “How Small and Mid Sized Firms Grow” we will discuss the pitfalls of working exclusively on using home grown solutions, instead of also learning from others to avoid their mistakes. This is the so called “not invented here syndrome”.

Every company has its own culture and way of doing things, some of those things lead to good results and others result in poor performance. Either way there is no company that can not benefit from some introspection and cross pollination of ideas to see what other companies and respected leaders have tried and see if any of those ideas can be utilized in their company. Many companies however think that they either know everything or are too insecure to try to learn new ways of doing things. Even the best performing companies are always looking to improve. To believe that the people in your organization have nothing to gain from the thousands of experts not already working for you leads complacency and loss of ones competitive edge. This does not mean that you adopt every new idea, but rather expose yourself to new ideas and see if there are not some colonels of truth in them that can be adopted by your company.

Many people think that if they are successful they have discovered the secrets of success and become insular. In today’s rapidly changing world nothing stays the same very long and it is constant innovation that is really the key to success over the long term.

CEO’s Jack Welsh and Jeffrey Immelt of GE famously launched their Work-Out program to break the old and outdated ways of thinking. They demanded their executives to be candid, flexible and fast to institute change in the company’s culture, habits and behavior. Their “Work-Out” program was perhaps the single most important element in making them the leader in their industry, using external consultants who helped design and deliver innovative solutions, from Noel Tichy and David Ulrich to Todd Jick Ron, Ashkenas and Steven Kerr. This process was documented in the book “The GE Work-Out: How to Implement GE’s Revolutionary Method for Busting Bureaucracy and Attacking Organizational Problems”. These concepts resulted in the reengineering of GE and supercharged their productivity. The principles of their Work-Out program was credited in permeating their entire management culture. I could name numerous other companies who have adopted the same concept, just as I could list many others who fell by the wayside by staying their current course.

So you may ask how does this relate to my small or mid sized company? The answer is that management principles are universal, the terminology and scalability may be different but the same rules and principles apply.

In our next blog we will discuss”: Setting both personal and company standards of ethics and values”.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We welcome your questions as to personal and business challenges you face in order to grow.

In this part of the series: “How Small and Mid Sized Firms Grow” we will discuss how best to grow:  geographically; new lines of business, acquisition and market penetration.

One is not forced to grow, they can stay exactly the way they are and have been. Some companies have the luxury to do this for a relatively long period of time and that may be just time for them but they will typically be in a small niche business that no one will care much about and will not grow. Alternatively, if they are large someone will come along and find a way to capture their market and for that is the immutable law of progress.

One has many alternatives to grow their business. One of the easiest ways to do this is to become a favored supplier to their customers, some of which are growing and will want you to serve them in new locations. Once you have an anchor client in a new geographic location you will likely be able to find new customers to serve. This strategy is one of the least risky ones to pursue as you have likely covered a good portion of your start up costs already. If you don’t have an anchor client you will have to determine the market size, growth potential, level of competition you will be facing, barriers to entry and a host of other factors to see which geographic market will be best to expand into.

Another way to grow is to add a new line of business. The closer allied it is to your core business the easier it will be for you to enter it as you know it and your clients are more ready to accept you as a new supplier. Being closely allied to your existing business does not however mean that is the best line of business to expand into. The growth rate may be low, as might be the margins, profit potential, ease in attracting new workers, etc. It may be better to start with a clean slate and figure out what the best line of business to be in and then determine what you have to do to get into that segment. We have had many clients re-engineer themselves as the opportunities in those segments were far better then what they had become accustomed to, This doesn’t mean this will be easy, without risk, or the best choice, but if you are considering a new line of business do you homework before settling on the “obvious” choice of something you are comfortable with.

The next thing is to expand via being acquired by someone to grow. It often represents the fastest path but if you don’t do your due diligence it can be a costly mistake. If you are a novice at this try to start small and be able to survive if you are wrong.

The fourth strategy (and there are far more options that one can consider) is simply to make a strong penetration of your existing market. This may take some combination of innovation, aggressive pricing, providing incentives and perks to gin up sales, hiring away your competitor’s best employees, etc.

In our next blog we will discuss learning from others to avoid the mistake of the “not invented here syndrome”.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

In this part of the series: “How Small and Mid Sized Firms Grow” we will discuss how to maximize the market value of your business.

 It obviously takes a willing buyer and seller to sell a business and as the saying goes, beauty is in the eye of the beholder. Having said that, how does one maximize the value of their business, whether or not they plan to sell their business? Having a highly marketable business is always a good thing. It is like a house, if it is in good repair and in a highly desirable neighborhood and marketplace one can feel comfortable knowing that for any reason they wanted to sell they could do so and have a ready source of income if they needed. Think of yourself as a potential buyer and all the things you would want in a company.

So what things maximize the market value of a company? Here a brief checklist:

1. A solid history of growing sales and profits, (EBITDA), without any gimmicks

2. A great reputation and a trade name that makes you a leader in your field

3. High gross margins that demonstrate you are not competing on price alone

4. Having sufficient profits, retained earrings and line of credit for most all eventualities

5. A loyal, stable and highly productive staff that is fairly compensated with retention tools

6. A diversified client base, where no client represents more the 15% of sales and profits

7. An owner who is not one of the key producers so relationships do not die when thye depart

8. Value added services, IP and products that differentiate you from your competitors

9. A business plan that provides a vision for growth and alternatives as conditions change

10. A tactical plan that anticipates events and so one can quickly deal with day to day problems

11. A team that  regularly evaluates everything around them for the winds of change

12. A management team that thinks for themselves, are trusted and have dealt with crisises

13. A set of metrics to evaluate their team and work with them to optimize their performance

14. A self critical, introspective team, not afraid to recognize mistakes and make changes

15. Understanding risk vs. reward to make moves when the relative payoff makes sense

16. The understanding of the cash flow and how far one can extend themselves

17. A company that does not settle for hiring 2^nd best staff, with a vigorous vetting process

18. A nurturing environment that encourages your employees to explore their ideas

19. No skeletons in the closet that when exposed will turn gold into dross

20. Future earningd that looks every bit as bright as the past, with a rational that backs that up

In our next blog we will consider growth options: geographically; new lines of business, acquisition, market penetration, etc.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

In this part of the series: “How Small and Mid Sized Firms Grow” we will discuss how to prospect to increase your market share.

In order to grow one can not rely simply on their current clients to feed them more business. They need to prospect for new business. They can do this by finding new opportunities with their current clients or prospecting for new business with accounts not presently serviced.

The first step is to find other department and people with decision making authority for your service in other parts of the company that you are currently serving. Nothing works better then an internal reference and it is surprising how many people deal with one person or department within an organization, not asking their contact to help then network within that company for more business. You may have to link through several people to find the right person, but keep on plugging. You may even find that other people in your own company are trying to solicit business from your company, while you already have an in that you are not cultivating.

The next step is to determine who are prospect that you should try to do business with. The sources you can use are many, including personal contact, networking through those same contacts, using the Internet to search for companies in your line of business, in your market area, buying a contact list that are available from dozens of marketing firms, reading the newspapers and blogs to find leads, going to industry association meetings and webinars, checking back with prior clients and reactivating them, etc.

Once you have your universe of prospects you need to find out which ones are worthwhile to spend your time in cultivating. You can glean this from going back to the sources noted above and queering them as to the market potential represented by the prospects in terms of size of the company, how large they are with respect to the services that you offer, upgrading your purchased contact list to indicate market potential with your marketing niche, etc. If you can find out whose business is completely locked up and their client is totally satisfied you can eliminate those who are theoretically a great prospect, but are practically not. This is not always very easy, but necessary.

You then want to determine who may not be fully satisfied with the services they are getting, who is growing and should have needs, who is in the news or the blogosphere which can provide valuable contact tips, etc. Once you have all this information you can rank people from the highest to the lowest on the potential scale. It is then time to determine how to contact them, referral, email, telephone call, etc. and how to set yourself apart with a value proposition, but that is part of another discussion.

In our next blog we will discuss how to maximize the market value of your business.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We welcome your questions as to personal and business challenges you face in order to grow.

Who Is After Your Clients?

In this part of the series: “How Small & Mid Sized Firms Grow” we will discuss finding out who is after your clients before it is too late.

Be assured that your clients are on some one else’s prospect list if they even have the possible worth of doing business with. The more visible they are, the larger they are, the greater a target they make. So how do you find out who may be after your clients and how to you defend your turf? In blog #14 we discussed retaining your clients. In this blog we will look at this from a different perspective, that of finding out specifically who is on the hunt and setting up a proactive defense specifically for that competitor.

The first step in finding out who is going after your clients is to stay in touch with them and ask them a variety of questions such as: if they are still very satisfied with your services, do they feel that they are missing out on anything, do they feel that they are receiving a fair value for what they are paying for, and most importantly has anyone offered them something that you are not, or at a lower apparent price? If you ask this of a those people in the organization you will likely find out if you are under threat. This should be done periodically, as things change. If you are safe, that is great as your client knows that you are continuously looking to make sure they are fully satisfied with your service. If not, you now need to prod them as to who it is that is seeking to replace you. Someone at the company will share this with you if have a good relationship with them and ask the question in the right way.

Everyone has strengths and weaknesses, it then becomes your job to determine the weaknesses of your adversary and counter them with your strengths to ward off any potential penetration before it starts. We can start with what might appear to be lower prices. You can hopefully demonstrate that given your in depth knowledge of your client, your prices are not only fair, but once someone else comes in there are all sorts of risks to the client by having someone unfamiliar with the account service them. And the cost of these mistakes far outweigh some fractional front end low ball price. There are dozens of other such counters you can make once you know who is going after your business and do a bit of research about them and how to best defend yourself.

Companies do not grow by ignoring the competition. It makes the best companies stronger as they must become more competitive to survive. Those who are complacent, stagnate.

In our next blog we will discuss how to prospect and increase your market share.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We welcome your questions as to personal and business challenges you face in order to grow.

In this part of the series: “How Small and Mid Sized Firms Grow” we’ll be discussing how to win over prospects.

As noted in the last blog, a person’s first priority is to retain existing clients as that is far easier then  to look for and win over someone else’s clients. You are seeking to replace someone else who is not servicing a customer as well as you can. Your job is to get them to understand what they are missing by not doing business with you.

• Get the facts by meeting with them to find out what they are getting from your competition

• Try to replace them at a lower price, or as a loss leader with gaining other business at good prices

• Find out what they are not getting from their current vendor and be able to fill that void

• Provide benefits for doing business with you, i.e. discounts and customer appreciation perks

• With this information you can justify the higher price of your services

• Create a relationship with the decision maker who you would like to do business with

• Document how you will be a profit center via increased productivity, higher quality, etc.

• Provide value added services beyond the basic services they are getting now

• Become the best vendor out there, using all of the elements noted above

• Finally, ask for the business or what you have to do for this to happen

In our next blog, we will discuss Finding out who is after your clients before it is too late.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We welcome your questions as to personal and business challenges you face in order to grow

In this part of the series: “How Small and Mid Sized Firms Grow” we’ll discuss how to retain clients.

The key to growth is first to retain ones existing client base, even before they look for prospects to convert into clients. Unless you are a public utility or have some sort of monopoly you always have competitors looking to grow by wooing away your clients. And it is far easier to hold onto your clients if you do things right then penetrating a new account.

So how does one retain clients? Here is a top 10 list, though one can add many more.

1. They can simply do any thing the client asks for, including lowering prices. This however may lead to retaining unprofitable business, particularly when one dominant client knows how valuable they are to you and continues to demand lower and lower prices.

2. They can volunteer price reductions, before the client requests them; lock them up.

3. They can negotiate trade offs for price concessions, such as higher volume.

4.  They can provide value added services to cost justify their prices, similar to what the airlines do with their frequent flyer programs, with various perks.

5. They can concentrate on building a special relationship so that pricing is not nearly as important as the quality, service, reliability and other factors that they provide. Building a relationship requires having the quality staff to be there for your client, providing constant attention to their needs, making sure you are asking for honest feedback so you can fix any perceived problems before they become an issue, attending to their needs and making them feel special, being a fountain of knowledge for them, etc.

6. They can quantify and document the value of their service in absolute dollar terms, so that their client fully understands that they are profit center for the client and not a cost center.

7. They can become an extension of their client business and make themselves critical and invaluable, so the client could not even think about separating themselves from you.

8. They can provide things to their client that their competitors can not; this may include creating important proprietary intellectual property.

9.  They can identify and protect their client from all sorts of legal and financial risks and do so more effectively then their competitors.

10. They can simply be the best competitor out there and make their client aware of this fact so they are not seriously tempted to look else ware for the products and services you provide.

Our next blog will discuss how to win over prospects.

To see all articles in this series please go to  http://optimal-mgt.com/blog.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

 We welcome your questions as to personal and business challenges you face in order to grow.

In this part of the series: How Small and Mid Sized Firms Grow discusses determining when it is time to expand and how to do this effectively.

 It is hard enough to run one operation, so why add to your misery and expand? The answer is that this may be true but if you want to become a large company you will have to do this and the more times you expand the easier it is to do so. So how does one go about growing? The first thing is to secure your base operation so that it is running well and you will not have to drop everything during an expansion to fix your core business. Having said that, nothing is ever perfect, but if it is running well enough you can start to consider growing. If things are under control you can expand business in your home base as well as start a new location.

There are a variety of ways to expand. Typically a company either sees a good business opportunity in a growing and underserved market, they have an anchor client that takes them there and expanded from there, or has an employee or solid person who knows that market and is a natural fit to start it up. Sometimes it is just a place one want to be and says lets go. Any of these can work provided that one does their homework first. On the negative side for example, if their new client is the only game in town and that is not enough to sustain them that would be nice to know. If they run the numbers and they will need $150,000 in terms of cash flow and they have only $100,000 with no wiggle room that should tell them don’t even start unless you can make ends meet.

Alternatively if they need $100,000 and have $150, 000 to invest then we have satisfied the first criteria, survival. They then need a game plan with specific responsibilities, due dates and facts to be confirmed, etc.

Next they need to verify if it will be worth all the effort to expand. If their base sales are $10,000,000 and the market potential if they get everything right is $400,000 in a flat market with severe price competition, a potential for a 2% return on sales (or $8,000 a year in incremental profit) and a loyal client base, there has to be better fishing grounds and the search for an expansion opportunity should continue. It is usually not that difficult to get a handle on the numbers and do some what if analysis to see how you can tweak the numbers to see if there is a way to make something work or satisfy yourself that its not worth the effort and risk.

Our next blog will discuss how to retain clients.

To see all articles in this series please go to  http://optimal-mgt.com/blog

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

In this part of the series: “How Small and Mid Sized Firms Grow” we discuss recruiters and HR managers.

As Gerber used to say “Babies are our business and our only business”. Well, in most companies today people are the lifeblood of their companies. Without good people whatever else the company does will not be done right. This can be applied to business in general as to the staff you hire from sales to maintenance workers. Some companies hire their staff based on the most cursory of interviewing, reference checking and testing. Others go through such a lengthy procedure that by the time they are ready to extend an offer the candidate may be long gone and has taken a job with a company that did not make interviewing a career. Some companies hire on the spot while others have well over a dozen interviews before making an offer. There is a happy median in finding the right people that vets them in a reasonable period of time with the right procedures and tools. That number varies depending on the degree of difficulty in finding the right candidate and the importance of the job itself. But three to six interviews should be sufficient for most situations. According to the BLS the average turnover rates vary from 1.3% for government jobs to some 6% for construction. But that is just an average. Many companies who do a poor job can see a turnover in excess of 100% annually. In addition the cost of turnover had been determined to be 200% of a person’s annual salary (+/- 50 points depending on the position). These concepts would apply to recruiters and HR managers alike.

Staffing companies of course have a unique situation as their recruiters find candidates for their clients needs, be they temporaries or direct hires (including executive search). Successful recruiters here most understand the client’s needs and match that with the candidates they recruit. Using these numbers a good direct hire recruiter can reduce turnover. For a client with a 50% turnover they can reduce this rate in half. For a $75K/year person they can save over $37,000 annually. For a temporary or contract recruiter there is on average a 13% annual cost savings vs. a direct hire employee. This person would save the client some $10,000 a year while on assignment and if and when converted the same $37,000/year savings would apply.

The combination of these factors has led to temps and contractors becoming one of the fastest growing segments of the economy, with temps rising from 1.6 % of the private labor force in April 1999 to 2.3% last month, and should top 3% in about another 2 ½ years.

Hiring, managing and motivating is very similar to the steps covered in Part 11 of this series.

Our next blog will discuss determining when it’s time to expand and how to do that effectively.

To see all articles in this series please go to  http://optimal-mgt.com/blog

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We welcome your questions as to personal and business challenges you face in order to grow.

In this part of the series: How Small and Mid Sized Firms Grow discusses how to hire, manage and motivate sales reps, account reps and business developers.

In most all companies everything starts with sales. Unless you have a monopoly, work for the government or have an endowment you need to obtain and retain customers and clients. In some organizations sales is done via marketing such as advertising, emails, or some other indirect sales approach, but this is still a sales function. Others use good old fashioned sales tools such as telemarketing, field sales calls, networking, sales seminars and the like. We are not going to deal with the pros and cons of theses approaches, but rather what it takes for the person in sales to do their job well. That means to obtain and retain customers and clients by whichever means are used. Customers usually connote someone who buys your products or services; a client usually means having a closer relationship and some degree of loyalty. Please note that in this brief commentary we can only provide some highlights and this is far from all there is on this subject.

Here are some facts to bear in mind when thinking about hiring and retaining the best sales reps:

• The average turnover rate of sales reps is 26%
• 10% of the sales force is actively disengaged
• Jack Welch’s, the highly effective chairman of GE terminated the bottom 10% of his Reps each year
• The total cost of replacing a sales rep is 38% of their salary
• The top ¼ of sales reps generates 57% of new business, as the lower ¼ lost more business than they gained

HIRE So what does one need to do when hiring good sales reps? Many companies find that referrals from existing staff tends to be a very good source as they already fit the mold and are likely to have acquaintances with similar traits. There is also no substitute for in depth interviews to get beneath the veneer of someone who makes a good first impression, although companies like Google take this to an extreme of a dozen interviews or more.

TRAIN When bringing someone new onboard manage and train them in the ways that fit in well with your culture and current methods. Someone new trying to change things that are already working well does not usually work. Train new sales reps along side an experienced solid producer, bring them along slowly and monitor their productivity and efficiency. After they understand your organization they should then be able to make positive changes to the ways things are done.

MOTIVATE Everyone needs something to turn them on. For some it’s money, others recognition, others it’s the knowledge of a job well done, others it’s competition, etc. For sales reps it is usually a blend of these with money being the primary item, with a healthy mix of recognition and perks. We recommend having a modest base with a high commission, usually with steps and risers with higher rates for the best people you can’t afford to lose.

Our next blog will discuss hiring, managing and motivating recruiters.

To see all articles in this series please go to  http://optimal-mgt.com/blog

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We welcome your questions as to personal and business challenges you face in order to grow.