Don’t Forget to Drain the Swamp!

March 30th, 2020

My father started his business when I was two or three years old.  The first time I remember” going to work” with him, I was around five or six years old.   Every business owner’s kid goes to work, either out of curiosity or to get the kid out of the house and give a spouse a break.  I remember seeing a plaque on his desk that said, “When you are up to your ass in alligators, it is easy to forget that you came to drain the swamp.”  I had just learned to read, so it was cool in my juvenile mind that I could say ass in front of my dad.  That memory makes me smile to this day.  I can still remember that plaque.  It was a vintage 1970s piece of art – loud colors on glass and an alligator with a grin on his face standing cross-legged leaning up against a pole with a swamp in the background.  If I had any artistic ability whatsoever, I could reproduce it.  Unfortunately, I have limited artistic ability and I have no idea where the plaque went. 

When I was older, my Dad told me that someone bought him that plaque when he started his business.  He kept it as a reminder to the time he hung his shingle out and prayed for someone to return his phone call.  I relayed that story to a colleague at work and she gave me the plaque that proudly sits on my desk.  It is a reminder of my father and a reminder, especially now, that I came to drain the swamp.  That swamp for me is building a long-term, sustainable, successful business. 

With the deluge of coronavirus news, yes, we have to focus on day to day challenges.  But everyone, especially leaders, needs to also look ahead.  What happens in 1 month, 3 months, next year, five years from now?  At some point, things will get back to “normal.”  Of course, every crisis has an impact on what that normal is.  Spend some time thinking about what that normal is going to look like in your industry, for your customers, for your career.  You’ll be better for it. 

Boring Businesses Matter in Times of Crisis

March 23rd, 2020

Just a few short weeks ago, all talk on every financial and business channels was about technology companies and technology stocks hitting record highs.  In January, a “master of the universe” from Wall Street, Ray Dalio, proclaimed, “Cash is trash.”  Oops.  You blew that one, Mr. Dalio.  I am a fan of your book, though. Your videos on the economy are great as well.  Can’t believe you missed the cash thing.  If you ran a business that doesn’t quite scale like a hedge fund, say a label manufacturer, you’d understand why CIMITYM is my mantra: Cashflow Is More Important Than Your Mother.  (Sorry, Mom.  God rest your soul.  Miss you, especially now.)  Most businesses do not scale with a computer terminal.  We need to buy equipment, hire people to run that equipment, train them, produce stuff, sell it, and wait for customers to pay us.  Cash matters.

Now, the CEOs of companies like Sysco Foods (food distributor) and Tyson Foods are rock stars.  They are the ones keeping everyone fed.  They were doing that prior to this crisis but no one seemed to care.  Funny how we see what really matters when things get crazy. 

To all of you in “boring businesses,” thank you.  You are keeping this country from chaos.  Maybe clout will turn from the finance guys who pushed companies to move manufacturing overseas to save money to those who create real products with real people.  That is the silver lining in the coronavirus chaos.  Making stuff and getting stuff to consumers isn’t sexy but it matters more now than ever.  Stay healthy!

The United States of Bailouts

March 19th, 2020

Are we having fun yet?  What a week.  As I wrote earlier this week, take deep breaths.  Alcohol or other mood alternating substances might be in order as well. 

Our good ol’ government is working on aid for businesses impacted by the massive slowdown in the economy.  Hopefully, they learned from the 2008 bailouts.  Here are a few things I’d like to see put in place if company takes government money.

  1. All executives take a 50% cut in salary immediately.  No bonuses or equity grants for any senior management until the taxpayers are paid back.
  2. No repricing of options for any employee of a public company that takes money.
  3. No share buybacks while government loans are in place. 
  4. All loans are secured and senior to any other debt.  If bondholders and existing lenders won’t subordinate, use the bankruptcy process. 

I know we are in unprecedented times.  I also know the last bailouts created a lot of winners and losers.  The government should not be in the business of picking winners and losers.  Crony capitalism is what is destroying the social fabric of our country. 

It is sad how small companies are being decimated by this crisis.  What is even sadder is the vitriol being spewed on Twitter and other social media outlets about “greedy companies that don’t care if their employees get sick.”  I have talked to no fewer than 25 business owners in the last week.  Everyone one of them says the same things:

  1. I want and need my employees to be healthy.  I don’t have a business without them.
  2. How do I pay my employees during this crisis?

Of course, there are bad employers, just as there are bad employees and bad people.  But they are not the majority.  Bad employers make the news.  Bad employees do not.  Most employers provide health insurance which they pay the lion’s share of.  Do you think they want their costs to go up?  Employers know they don’t have businesses without employees. 

I pray our government officials get this right.  If recent history is a guide, we need a miracle. 

Take a Deep Breath*

March 16th, 2020

Schools announced shut downs.  The NCAA tournament was canceled.  Disney closed all of its theme parks.  Tom Hanks is sick.  And that was just one day. 

The constant bad news barrage brought back a song from my youth by REM.  And, no, it is not “It’s the End of the World.”  For some reason, the opening lines of Radio Song kept going through my head. (I’ll bet that threw you for a loop!)

Opening Lyrics from Radio Song

The world is collapsing
Around our ears
I turned up the radio
But I can’t hear it

Yes, it seems like the world is collapsing around our ears.  We hear the constant concerns about coronavirus.  Every media outlet showing an updated case count.  The barrage of negativity can be overwhelming. 

Take a deep breath.  Turn off the news.  Focus on what you can control.  And please, don’t hoard toilet paper.  They’ll make more. 

Those of you in a certain age group will enjoy the You Tube link.  Turn it up and dance like Michael Stipe!

*Take a deep breath only if you have properly socially distanced yourself from others. 

https://songmeanings.com/songs/view/123180/

Change from a Position of Strength

March 9th, 2020

Just a few months ago, Elizabeth Warren was leading in the Democratic Primary.  Just a few short weeks ago, Bernie Sanders had “all but locked up” the Democratic nomination (CNN commentator).  Now, it looks like the standard bearer, Joe Biden, is the guy for the democrats this fall.  What happened? 

Change – real change – is really hard.  The far left candidates focused their platforms on radical change.  When things are relatively good, people don’t like to change.  Sanders and Warren continue to campaign on all that is wrong in the world.  That strategy doesn’t work when things are relatively good. 

Isn’t it amazing that we all now love our private health insurance when it is compared to a government program?  Really?  As I’ve written in the past, our health payment system is broken and I think both sides agree with that.  They might not agree with how to solve it, but it cracks me up that even Democrats are running on keeping private insurance.  Why?  Because things are relatively good for most Americans (coronavirus concerns aside). 

Humans are wired to not change until something bad happens.  As was quipped in 2009 by Rahm Emanuel and others before, “Never waste a good crisis.”  We don’t change our diets until we have heart issues.  We don’t change our spending habits until we’re out of cash.  Isn’t that dumb?  Shouldn’t we fix things before it’s too late?  We’re not really good planners.  We are good at reacting to problems. 

Business is relatively good right now for most sectors.  I submit we should “fix” things in our businesses now and not wait for the crisis.  The economy will turn at some point.  No one knows when.  Do you want to be forced to make changes?  Don’t wait until next year to change what you know needs to change.  Next year is now.  Change from a position of strength. 

Will Coronavirus Lead to Inflation (that the Government Actually Reports)?

March 2nd, 2020

For a long time, I have questioned how our government reports inflation.  For example, according to their metrics, a car is “cheaper” today than it was twenty five years ago because of added features that government economists place some magical value on.  But in terms of affordability (as a percentage of income), a car is much more expensive today than it was twenty five years ago. 

Anyway, back to my point.  I have three anecdotal stories to share regarding coronavirus and its impact on product availability and prices.

  1. This is from a business leader in the shrink sleeve industry:  “We had an interesting week with three “old” customers returning and several new companies requesting quotes.  Looks like the issues in China are getting people scared and they are looking for USA sources.”
  2. My brother and sister in law are building a house.  They ordered a custom shower insert.  It was supposed to ship from China last week.  That didn’t happen.  They have no idea when it will ship. They are now scrambling to find a different source.  It’s going to cost more.
  3. I was recently on a plane with a man in the clothing industry.  Supply is good now but his company is getting concerned about supply in the fall and winter, as the major factories they use are closed right now. 

Even if coronavirus does not get worse, it will have a lasting impact on global supply chains.  Companies are going to realize that you don’t have a business if you can’t get a product.  Maybe the long sought after inflation our Federal Reserve has desired is finally coming.  

An Open Letter to Sales People

February 24th, 2020

Dear Professional Sales Person,

The best business advice I ever received came from my father.  I was in high school and we were having a conversation about careers.  He said, “All of life is sales.  You’re always selling yourself.”  While I am not a sales person by the classic definition, I think I have spent my career heeding his advice.  With that in mind, I’d like to offer some advice, especially to those of you whose vocation is in sales.

1.  Technology has made “connecting” easier.  Accepting your LinkedIn connection does not mean I am your gateway into my company.  Asking me to connect you to the “decision maker” in my company is the lamest request you can make.  

2.  If your company chooses to buy a trade show attendee list or some other contact list, verify your mail merge program works.  Sending an email addressed with the wrong name doesn’t inspire confidence in you or your organization.

3.  Sending me a silly link to your calendar so I can schedule an appointment to talk with you at your convenience is insulting.  I’m the potential customer; my convenience is what matters.  Whatever you paid for that stupid program is too much.

4.  With all the information available on line, it is pretty easy to discover basic facts about someone you are cold calling or emailing.  If you can’t spend 30 seconds to find out where a prospect is located before you call, don’t call.  

5.   Promising dramatic cost savings or tremendous revenue growth makes me think either you don’t understand my business or you think I am an idiot.  Do yourself a favor and do a little research before sending an obnoxious email saying you can save me 25% on (insert product or service here).  Use your sales training.  Find pain points.  Provide information.  Every business wants lower costs and higher revenue.  There’s nothing unique about offering those.

I generally pick up my phone, return phone calls, and respond to emails because I want to learn.  Before you sell me, teach me.  That’s how you’ll have success. 

Regulations Continue to Hurt Small Businesses

February 17th, 2020

One of the lasting impacts of the Great Recession is the number of business startups has decreased.  (https://apnews.com/e7179fc8b9dc4399818f2038b75ec423)  Many explanations are bantered around as to why business formations have not rebounded, including demographics, availability of capital, and the impact of technology advancements.  While all those reasons are certainly contributing factors, I submit the ever increasing regulatory and compliance burdens placed upon businesses are the real reasons there are less startups.  I will focus on financial compliance and not even get into employment or environmental compliance burdens. 

Two aspects of financial compliance really stick out to me as burdensome.  A few years ago, the Supreme Court ruled in the infamous Wayfair decision (https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.) that states can collect sales tax from sellers even if the sellers do not have a physical presence in that particular state.  The prior standard was a business had to have a nexus in a state in order to be subject to sales tax.  That opened up the floodgates.  States, desperate for money, are looking for sales tax revenue everywhere they can.  A vast majority of our customers are not subject to sales tax.  Yet a certain state that is in the news for teetering on insolvency is sending someone to our headquarters to do a sales tax audit.  We have to prepare information for the auditor.   I have to have someone help this auditor for a few days.  All of this busy work costs real money.

Secondly, the Financial Accounting Standards Board (FASB), the brain trust behind Generally Accepted Accounting Principles (GAAP), has changed revenue recognition rules.  If you are a masochist, spend some time reading those thrilling rules.  We have spent significant time and money proving we comply with the new standards that fundamentally change nothing about how our business operates.  The latest request to comply put me over the edge.  We have to produce a letter from our law firm that explains how we will recognize revenue if a customer cancels an order.  Law firms don’t write letters for free.  But a FASB clown thought that would be a good idea to have a legal document on file in case someone ever asks.  (If you want me to go on a tirade, buy me a drink and ask me to expound on why GAAP is a joke.) 

Fortunately, our business has grown enough that we have people internally and externally do this stuff.  I’d go crazy doing this stuff because very little of this work is value add.

People start businesses to solve problems, not do paperwork.  The increasing paperwork burden on businesses creates barriers to entry for startups.  If we want to encourage entrepreneurship, reduce the regulatory burdens.

Are Companies Concerned about the Environment or just the Bottom Line?

February 10th, 2020

I recently picked up food for my son and me from a fast casual restaurant.  As I was walking out the door with the bag, which was not over packed or very heavy, the bag broke.  My food went everywhere.  The manager came out, apologized, and said they’d remake the food.  She then said, “Ever since we switched to these new bags, we’ve had a lot of issues.”  Perhaps this gives you too much insight into the life I lead but a complaint about packaging excited me.  I had to engage her in a conversation.

Me:  “Why did they switch bags?”

Manager:  “They told us they’re more environmentally friendly but I think they just wanted to save money.  They’re thinner.”

Me: “So they down gauged the material.”  (One of the few technical terms used in packaging that I actually understand.)

Manager: “What does that mean?  Did they make them thinner?”

Me: “Exactly.”

Manager: “Well, it sucks.  My bonus is partially based on food waste.  I can tell you it’s gone up because these stupid bags break.”

They remade my order, double bagged it, and I was off.  As I drove away, I thought about the purchasing manager whose bonus is based on saving money on packaging.  I thought about the sustainability manager whose bonus is based on creating a report that says the company used less packaging.  I also thought about the poor manager that has to remake orders, hear about food waste increases in her performance review, and deal with irate customers because bags break. 

Like most people in my industry, I care about the environment.  We need sustainable raw materials to have an industry.  We have a responsibility to protect the environment.  I also recognize companies do not want to pay more for what they perceive as a non-value add item (packaging).  If I had a nickel for every time I hear a customer say, “We want something environmentally friendly but it has to cost the same or even less,” I would be able to get my wife a private plane so she could fly around like Bernie Sanders, Elizabeth Warren, and Al Gore and tell people how important the environment is.  The reality is sustainability requires an investment.  Thinner does not always mean less expensive. 

Big Company Madness

February 3rd, 2020

I recently spoke at career day at my son’s school.  The day before my presentation, I pulled a few “stickers” out of our sample room to show the kids what our business does.  I’ve talked to students before and figured I could just wing it.

The school had all of the parents assemble in the lunch room.  I saw several parents I knew, including a mother of one of our son’s friends.  She works for a large public company.  She is the most prepared person I know.  She had a set up like a tradeshow booth.  She had a display of her multiple diplomas (required for her profession).  She had a poster board of articles about her profession.  She had tools of her trade.  Needless to say, I felt unprepared. 

I noticed she had a table cloth on the lunchroom table.  It appeared to be upside down.  She told me the ordeal she went through just to get the tablecloth.  She called the marketing department who told her to call the community relations department.  The community relations department sent her a table cloth with a logo on it with explicit instructions: the logo could only be displayed if marketing approved that it could be displayed.  She called the marketing department and was told she had to fill out an online form to get approval.  She filled out the form and awaited approval.  She did not receive an approval prior to career day so she positioned the table cloth with the logo not visible.    

I understand that a corporation has to be protective of its brand.  I know that can often involve coordination among different departments.  But at some point, shouldn’t common sense prevail?  A senior employee is presenting at her son’s school’s career day!  Shouldn’t the company trust her to make a good decision regarding its brand?  Companies talk a lot about empowering their employees.  This example shows a lot of them talk the talk but don’t walk the walk.