It’s the Demographics and Government/Federal Reserve Policies, Stupid!

May 3rd, 2016

I’d like to thank our former president and potential First Man (Is that the title?  First Husband?  Boy will Saturday Night Live have a field day with that one!) in a few months for inspiring my title this week.  We had another quarter of anemic economic growth.  This lack of growth is inspiring support for presidential candidates that would have been on the fringe at best only a few years ago.  Barring a year end growth spurt, the US will have its 11th consecutive year of under 3% growth in real GDP.  Our country has never gone this long with such pathetic growth.  At the risk of offending readers on both sides of the political aisle, I’ll outline why I think we have had such poor growth.

  1. We’re getting older.  Older people produce less.  Earth to Republicans: the US economy grows when the population grows.  We need immigrants.  I’m pretty sure most of you are descendants of immigrants.  I am.  We need immigration policies that work, not walls.
  2. Government policies.   NLRB rules.  Tax increases on capital.  Bank regulations.  I could go on and on.  Earth to Democrats: when you make something more expensive, you generally get less of it.  Check out Economics 101 and the supply/demand curve.  If you make it more expensive to hire someone, you make alternatives (automation, outsourcing, overtime) relatively cheaper.  Rationale economic actors choose the cheaper alternative.  That leads to lower employment growth.  If you want more jobs, make it easier to hire people.  If you want economic growth, reduce the regulatory burden on businesses.
  3. Federal Reserve policies. I do give the Fed credit for trying to counteract #1 and #2 by keeping interest rates low.  Their theory is people will invest more if money is cheap.  It helped a little and gave our banks time to re-capitalize themselves.  But the punch bowl is empty and I think their policies are now having negative consequences.  Go back to demographics.  If you are retired, how do you generate income with interest rates near zero?  If you can’t generate income, will you spend a lot of money?  Of course not.  If you’re a business facing a low-growth environment, does cheap money outweigh the lack of demand for your products?  No, it keeps marginal competitors afloat longer than they would be able to stay in business if they had to pay to borrow money.  Raise rates.
  4. Anti-capitalism/anti-business rhetoric. I recently saw survey results that claimed more than half of millennials do not believe in free markets.   We’ve got presidential candidates on both sides spouting how “rigged” the system is.  (It is interesting to hear Democratic candidates talk about how bad the economy has been under a Democratic president.)  We’ve got extremist professors with tenure teaching our youth what a bad place the USA is.  Shame on all of you!  I have a simple solution: while we might have people talking about building walls to keep people out, there’s no wall keeping you here.  If you’re not happy, go somewhere else and spout your negativity.  We’ll be just fine without you.  I do encourage you to talk to someone who came here recently.  You might realize it’s not so bad here.

Despite all these challenges, let’s not forget the most important thing: the economy is growing!  We aren’t contracting.  Could and should the economy be growing faster?  Of course.  Will it?  Yes.  If I knew when, I’d be blogging from a much nicer place than my current locale!  Keep a positive attitude, make decisions based on facts, not rhetoric, and good things will happen.

 

 

 

It’s OK to be Wrong (Sometimes)

April 26th, 2016

Our fourth grade son had to do a book report on a famous person.  Imagine my delight when he said he wanted to do his report on business man Elon Musk.  Maybe, just maybe, the capitalistic bent my wife and I indoctrinate him with is working! From a distance, I’ve admired Musk since his PayPal days.  I love the private sector “space race” occurring right now, in which SpaceX is participating in.  Tesla is an incredible product.  He has a unique ability to identify opportunities and see a future state like few executives today.

Part of the report required assembling quotations from the famous person.  The first quotation he picked from Elon Musk was, “Failure is an option here.  If things are not failing, you are not innovating enough.”  Picked by a non-jaded ten year old.  Wow.  (Fortunately, he hasn’t used this line to explain a poor grade, at least yet.)  We need to be OK with failing.

I define innovation in a broad sense.  To me, it’s trying something new or different.  That requires taking a risk.  We discourage risk taking in a world in which we seek instantaneous gratification and do not accept mistakes.  If we discourage risk taking, we discourage attempts to make things better.  Not everything we do works.  If you think everything is perfect, you have a serious case of denial or aren’t doing enough.  I tell our team at I.D. Images all the time that I get things wrong. As the head of the business, the biggest “wrongs” should be authored by me.  Of course, the flipside is true – the biggest wins should come from decisions I am involved in as well.  I can assure you some of my decisions haven’t worked out so well.  Fortunately, we’re still alive and kicking as a business, so some good decisions have counteracted the bad.  That’s what I mean by sometimes – if you are making more bad decisions than good decisions, there’s a problem.  We still have to keep score and we are still measured by the results we produce.

Take Elon Musk’s advice.  Take a risk.  Challenge the status quo.  And if it doesn’t work, channel your inner ten year old self.  It’s ok to be wrong (sometimes)!

Tax Day Has Come and Gone.  I’m Still Waiting for a Thank You.

April 19th, 2016

Every year, I diligently send out tax forms to multiple places.  We added a few this year, including the great state of Tennessee.  Our business or I personally now file taxes in more jurisdictions than I can count on my fingers and toes.  In most normal business relationships, a provider of a good or service often thanks the person who purchases said good or service.  After all these years and all these tax returns, I’ve yet to receive a thank you from a government entity for my purchases.  If it weren’t for taxpayers, none of these entities that levy taxes would exist.

I am not an anti-tax nut job.  I couldn’t do what I do and live the great life I have without some type of government.  Do I think I pay more than my “fair share” of taxes?  Yes.  Of course , there are many people who think I should be paying more, including a socialist running for president.  That’s a discussion for another day.  Fairness is in the eye of the beholder; there is no tax system that is “fair” to everyone.  More importantly, I feel used, abused, and ridiculed by our government officials.  Over the last several years, it has become increasingly acceptable for government officials to stir up class warfare and talk about how the “rich” don’t pay their fair share of taxes.  According to a recent study, over 45% of American households pay zero federal income taxes.  ( http://dailycaller.com/2015/10/07/in-2015-45-percent-of-americans-will-pay-no-federal-income-taxes/)  These 45% benefit from the military, infrastructure, and rule of law our government provides, just as I do.  Is it “fair” that they pay no federal income taxes?  (Before someone attacks that question with the payroll tax argument, I will reiterate I am talking about income taxes only, no other taxes.  There are a plethora of taxes we all pay.)  I don’t have the answer to a fair tax system, but I do know one thing: the government could levy a 100% tax on the group our current administration has labeled “rich” and still not fund its obligations.  The simple math illustrates everyone’s taxes need to go up and/or government spending needs to be cut dramatically in order for the good ol’ US of A to meet its financial obligations.  No wonder no sane person wants to be president.

As we learned in kindergarten, a simple “thank you” solves a lot of problems.  All of the taxing entities know how to find me to get me to pay.  Apparently they skipped kindergarten and don’t know how to acknowledge a paying customer.  My guess is my thank you for writing this will be an IRS audit!

 

Where Are Your Blind Spots?  What Are You Doing About Them?

April 12th, 2016

I was on a highway the other day and preparing to pass a slow moving car.  As I started to accelerate and move into the left lane, my car alerted me that a car was in my blind spot.  It did so before I even turned my head for a quick glance over my left shoulder.  I never had to take my eyes off the knucklehead in front of me who, for some unknown reason, decided to get in the left lane.  I was able to slow down and avoid rear ending him.  The car in the left lane had to swerve into the berm to avoid him.  Fortunately, no accident occurred.   I’ll never get another car without blind spot warning.

This seemingly meaningless incident got me thinking.  Why do certain drivers think it is their civic duty to slow down traffic?  If you want to go slow, stay out of the fast lane!  Let people pass you.  More importantly, it got me thinking about the concept of blind spots.  Technology has helped drivers identify blind spots and avoid accidents.  We’ve all got blind spots in our lives, things we don’t see that can have a dramatic impact on personal or professional success.  As my wife will gladly tell you, I am perfect and have no personal flaws.  More seriously, she’s pretty good at identifying blind spots in how I think and I am grateful for that (usually after the fact, not when she’s telling me).

On a professional level, it seems the higher up the ladder you get, the more opportunities for blind spots you have.  “The Emperor’s New Clothes” is a famous story for a reason.  Quite often, the path of least resistance involves employees telling senior management what they think senior management wants to hear.  Customers usually don’t tell us they’re going somewhere else.  It takes effort to figure out what we’re missing.  We get into patterns of talking with the same people.  Check your browser history.  If you’re anything like me, you regularly go to the same websites for information.  (I often do it in the same order too.)

The first step in dealing with blind spots is to figure out how you are creating them.  Log your activity for a week.  Do you talk with the same people internally?  Do you talk with the same people externally?  Make it a point to mix up whose perspectives you get.  Make it a point to read something that makes you uncomfortable.  Doing so will help you avoid that fast moving car (competitor/technology/etc.) that can ruin your day.

Lost Sales: All About Price? Hmm…

April 5th, 2016

Let’s spend a moment in the land of make believe.  Imagine this conversation:

Sales Manager: “What happened with the potential business with XYZ?”

Sales Person:  “They decided to go with a competitor.  I didn’t prove to them our company and me could provide them enough value versus what our competitor said he could provide.  I need to get better.”

Meanwhile, back on planet earth, here’s the real conversation:

Sales Manager: “What happened with the potential business with XYZ?”

Sales Person: “We got beat by a competitor.  Our prices are always high.  What are you going to do about that?  I need to sell more so I can pay for (a new car, my beach house, my kids’ college, insert want here).  We’re just not competitive and it’s not my fault.” (This situation never happens at I.D. Images!  In all seriousness, we’ve got a great sales team who uses price only occasionally as a reason for lost business.  They know better!)

Yes, we all deal with price competition and it’s not going away.  We’ve allowed price to become the canned answer to every piece of business we don’t win.  Sure, it happens but probably not as much as our sales people lead us to believe.  It’s easy for a customer/prospect to say price is the reason they went somewhere else and it’s even easier for a sales person to not follow up and blame price for not winning the order.  It’s even easier for a sales manager/owner to accept price as the reason for lost business.  Who likes confrontation?  A wise mentor of mine would tell me constantly, “In management, you get what you accept.”  If we accept price as the catch-all for lost business, that’s what we’ll be told.

We really become what we believe.  If our sales team thinks we’re not competitive, we become not competitive.  We start to play the price game.  Remember, you can only play the price game if you know you are the cost leader.  We all like to think we’re the low cost producers.  There’s only one.  It’s probably not you.  As I wrote a few weeks ago, if you can’t sell value, you’ll be automated.  If you’re losing business truly because of price, your company has no choice but to cut costs.  (Side note: watch what happens in California with their new minimum wage law and required family leave requirements.  The cost of labor went up.  Therefore, the cost of automation went down.  This is what happens when politics are controlled by lawyers.  Many lawyers have told me they went to law school because they hated math.  The talking points of a higher minimum wage sound great.  The math is a problem.)

This blog was inspired by my friends from Butler Street.  You can read their words of wisdom here:  http://www.butlerstreetllc.com/#!Secrets-your-Sales-Reps-are-Hiding-that-are-Killing-your-Business/c21xo/56f57f6f0cf213d90db5bdf6

Mastery Takes Time

March 30th, 2016

Early in my career, I was an Excel wizard.  Macros, formulas, I could do it all.  Over time, my skills have eroded.  (Our youthful IT department says I’m getting old.)  Last week, I was working on a spreadsheet.  I did something and got the dreaded line pointing both ways.  I had created a circular reference.  I hit undo as much as it would allow me to.  I got rid of the circular reference but somehow got the #REF to appear in half my cells.  In a panic, I accidentally hit Control S, saving the file.  My mistake was now permanent.  An Excel veteran made a rookie mistake.  Fortunately, most of my spreadsheets these days consist of little more than basic addition and subtraction with the occasional “IF” formula.  It took a few hours but I was able to recreate what I ruined.

As I calmed down and realized the sun would still rise tomorrow, I remembered how much time it takes to master something.  I think I spent the first few years of my professional life in finance learning how to use and manipulate spreadsheets.  I could even use Lotus 123 back in the day.  It took time to develop my skills.  My bosses understood that and gave me tools and the time to master the skills I needed to be productive.  Time is a precious commodity.  We want our employees to be productive from day 1.  Think back in time.  Were you really productive at your first job during the first few months?  Do you give your team the time and tools to master new skills?

Just as it takes time to master a skill, it takes time to develop trust in a relationship.  A customer won’t just hand over business over night.  As I’ve harped about several times in my writings, having your marketing department send a few emails isn’t going to cut it.  Pick up the phone and call your customers.  Even better, go visit them.

In our instant gratification, always on world, it is important to remember that developing skills and developing relationships takes time and effort.  Give people time to develop their skills.  Invest your time in your customers.  Both activities will pay dividends in the long run.

Key Differentiator #2: Follow Up

March 21st, 2016

I wrote last week about having a sense of urgency being valued by customers.  Another key activity most people and companies forget to do is actually quite simple: follow up with customers and potential customers.  If a customer asks for something, they’re usually interested in buying it.  If you reach out to a prospective customer with marketing materials, how hard is it to check in on him?  The worst he can do is tell you no; it’s not as if you have sales to lose.

A lot of sales training courses emphasize follow up.  One of my favorites is when potential vendors send a letter or an email and follow the sales training script of providing a specific date and time when that vendor will follow up.  (I’ve taken a few sales training classes and the specific time follow up was wisdom bestowed upon me by both of them.)  I still have a letter from an accounting firm I received over three years ago.  The letter introduced the firm and concluded with, “Partner XXX will call you December 6 at 9 am to set up a time to meet.”  That follow up  was promised for December 6, 2012 – over 3 years ago.  I still haven’t gotten a phone call!  I’ve been waiting patiently for the phone to ring.  Do you think I’m going to meet with that firm if someone actually does follow up?  If I get forgotten before I actually buy something from a sales person or a company, what will happen when I’m a customer?

If you’re prospecting for new business, follow up is not a canned email.  I despise emails that come from an email service and start, “Brian, I sent you an email about our XXX last week and I haven’t heard from you.”  That’s not how the process works: if you want to sell me something, I need to hear from you.   Even worse is the phone call in which the sales person lies, “Brian, we spoke a few weeks ago.  Do you remember me?”  The sleazy stock brokers tend to use this tactic.  They usually mention a company that’s been in the news and claim they told me about it a few weeks ago.  True follow up needs to be personalized and demonstrate you actually did more than look at a list your company purchased before calling or emailing a potential prospect.  It requires knowing something about your prospect and what his needs might be.

If you’re following up with an existing customer, there’s a simple question to ask: “What can I do to help you make the right decision?  Even if it’s not my product or service, I want to help you do what’s best for you.”  Talk about a great opening line to learn more about your customer and potentially your competition.  If you’re already doing business with a customer, you’ve earned the right to ask that question and mention the value you can bring to him.  The customer wouldn’t be buying from you unless you (and your company) provided value.

The world has become commoditized because professional sales people let it happen.  If you allow all your communication to prospects or customers to come from an email program, you provide no value.  If your follow up to an existing customer consists of asking “Where do I need to be (price wise)?,” you’re admitting you don’t think you provide much value.  Sales is a profession.  Being a professional requires some basic skills.  Have a sense of urgency about your customers and their business and follow up with them.  You’ll find yourself in the top 10% of professionals out there.  The other 90% will have their jobs automated.  I’ll close with the best business advice my father ever gave me:  All of life is sales.  Whether your business card says you are a sale person or not, you are always selling yourself.  Don’t ever forget that.

A Sense of Urgency is Necessary

March 15th, 2016

 

I met with a customer last week who continues to make a very nice living as an “old school” salesman.  He bends over backwards for his customers.  He was very candid, “I know my vendors think I’m a pain and I know my staff thinks I’m a pain.  I treat every order and every customer issue like the world is ending.  That’s why my customers turn to me.  Very few people do that anymore.”  I joked with him, that, yes, we know he’s very demanding but our people love him!  In all seriousness, as a person passionate about business, I do appreciate his approach.  As a supplier, it can be tough to meet what he demands for his customers.  But his demands make us better.  His sense of urgency rubs off on his staff which rubs off on us.  If a supplier can’t meet his customers’ needs, he’ll find someone that can.  If we want his business, we need to bend over backwards.  It’s easy to see why he’s successful.  Don’t you want someone like that helping you?

In an era where buyers often have more information about the products they need or want than sellers, especially with regards to pricing, service remains a key differentiator.  In fact, it might be the only differentiator left in most markets, especially in the print world.  Virtually every day we get competitive prices thrown at us.  I often have to remind myself why customers ask us to match a price: they value something we do.  Usually, it’s service.  Don’t get me wrong – we’re far from perfect.  As I tell our great staff on a regular basis, if you hear me say we’re the best we can be, that’s the day you better have your resume together and start looking for a job.  It’s an endless quest to get better.  It starts with a sense of urgency.  Every order matters.  Every customer matters.

It’s not easy to bring your “A game” every day.  It’s easy to say to yourself, “They’re a small account” or “That’s a small order.”  That starts a path towards irrelevance.  In this ever more connected world we live in, we have two choices: automate as much as possible (take out costs) or service the heck out of our customers.  It’s always necessary to take out costs but it’s not sufficient for most businesses.  Most of us also lack the technical abilities to make a career out of automating processes.  There is still the old truism: people want to buy from people.  Work on your service skills.  Start with a sense of urgency.  Every order, every customer deserves your A Game!

We Just Received a Raw Material Price Increase Letter.  Really?

March 7th, 2016

Last week, we got notice that one of our direct thermal face stock providers (NOT a laminate supplier) announced a price increase.  After I got done laughing – after all, there’s no inflation, right? – I started to piece together the story.  As I wrote about in early November, Cenveo closed its direct thermal plant (the old Nashua plant).  Using the simple supply and demand equation we all learned in Econ 101, less supply with no change in demand means higher prices.  Economic text books also used to say negative interest rates would never happen.  Check out Japan and Europe to refute that theory.  You get charged for saving money in those countries and some economists want the US to follow suit.  (it’s not a good time to be a saver.  But didn’t excessive borrowing cause the financial crisis?  A topic for another day.)

Even with less supply in the direct thermal market, I think a price increase will be tough to sustain.  Overall demand isn’t terribly strong.  More than likely, a competitor will relish the opportunity to gain market share in this environment.  We haven’t heard of any increases from other suppliers as of yet.  I applaud the effort in trying to get an increase through in what is a tough environment, but more than likely all that will happen is some shifting of business among suppliers.

Our industry hasn’t seen wholesale raw material price increases since July 2011.  In general, most of us can raise our prices only when raw material prices increase.  If there’s a business out there whose operating costs have gone down over the last 5 years, goodonya as the Aussies say.  I’m pretty sure no one can honestly say they’ve cut operating costs over the last 5 years.  See healthcare costs, regulatory costs, wages, etc.  I completely understand the need for a price increase.  With tepid demand growth and commodities, while appearing to stabilize from January’s declines, still low, most customers will question the validity of an increase right now.

Expect to see a lot of product substitutions in your direct thermal products over the next several months.  This will be a precursor of what is to come in other markets.  Some daring raw material vendors will announce price increases.  Until we see consistent raw material inflation (and we will), competitors will be unlikely to follow.  As this happens companies will scramble to substitute alternative products in lieu of raising prices.  It’s starting in direct thermal but it will spread as companies try to maintain their margins.  It’s going to be an interesting year!

Come On Apple!  Use Those Geniuses!

March 1st, 2016

I’ve written in the past about my conversion to an Apple household.  I can assure you the stock being down has nothing to do with what my family has spent on Apple products over the last year.

My Beats headphones have been acting weird lately.  After going on line and troubleshooting to the extent I could, I had to take them to a store for service.  (Note to Apple: provide the serial number on the manual.  Those of us getting older struggle to read the 2 point font.)  Fortunately, I had a business meeting near the closest store to my house, which is about 35 minutes away.  I took them in and after 2 minutes of service, the very friendly genius told me they needed to be sent out for depot service.  A replay of our conversation:

Apple Genius:  “They’ll be back in 3 – 5 days.”

Non Genius Customer:  “Great.  Will they be shipped to my house?”

Apple Genius:  “Unfortunately, no.  They’ll be shipped here and you can pick them up.”

Non Genius Customer: “Really?  I don’t care if you charge me but it’d be a lot easier if you ship them to my house.”

Apple Genius: “Unfortunately our system won’t allow that.”

Non Genius Customer in a Jerry Seinfeld moment:  “You’re Apple!  I’m sitting at an Apple Genius Bar.  You can’t figure out how to ship a product to my house?  None of the geniuses within Apple can do that?”  I even flailed my arms like Seinfeld and spoke in a nice but sarcastic tone just like he does.

So I waited patiently for the opportunity to pick up my product at a store that’s not that convenient to my house.  I’m happy I’ll have a working product but a little dismayed of the time I will spend driving back and forth to the store.

All companies make mistakes.  If you make a product, stuff happens and the product doesn’t work.  Make it easy for your customers when something goes wrong.  Make it convenient for your customers when something goes wrong.  In Apple’s case, they could easily derive revenue from a situation like this.  The product is under warranty so they’re covering the repair or replacement.  Had the Apple employee said, “Under our warranty policy, you can pick up your product at our store.  However, if it is more convenient for you, we can ship it to you for a nominal charge of $X.”  I probably would have paid $25 to have it shipped to my house, maybe more.  I know it wouldn’t cost that to make me happy.  Let the customer make the decision that is best for him.  Most customers understand things go wrong.  Very few customers are patient when something goes wrong  and you don’t make it easy for them.  It’s not always possible to turn lemons into lemonade but companies that make an attempt will win fans for life.