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Take a Vacation

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It’s a counterintuitive approach,  but if you want to work smarter and be more productive,  then take a few days off and go away on vacation.  I realize that can be easier said than done for Freelancers and others in the billable hours universe.  Especially in a soft economy,  many of us are doing all we can to cover the monthly bills and the thought of slacking off on business pursuits is almost unthinkable.

Yet,  numerous researchers have demonstrated that vacations are comparable to a process improvement in your business,  resulting in increased productivity and efficiency.  Vacation does not mean that you no longer value the clients.  In order to avoid burnout and keep your batteries charged,  taking time off and traveling to a place that allows you to relax and unwind is a wise business strategy that pays personal and professional dividends. 

Every once in a while,  humans need to forget about work and relax and enjoy ourselves.  Recent research has shown that  a three to five day mini-vacation,  rather than the traditional two week time frame,  gives the most enjoyment.   As luck would have it,  that is exactly what fits well into a Freelancer’s often erratic project-based schedule.

A 2010 study by Jeroen Nawijn,  a lecturer at Breda University of applied Sciences in The Netherlands,  found that for most people,  the planning activities and anticipation provide more satisfaction than the actual vacation.  Nawijn suggests that if possible,  several three to five day trips should be scheduled throughout the year to reap the maximum benefits of the vacation experience,  starting with the fun we have doing the planning and enjoying the anticipation of the big adventure.  As further evidence,  psychologists Leigh Thompson of Northwestern University and Terence Mitchell of the University of Washington came to the same conclusion in their 1997 study of the psychological effects of vacations for workers.

Thompson and Mitchell suggest that vacationers participate in activities that completely absorb their attention.  Lolling on the beach and drinking pineapple rum punch is very nice,  but activities are more effective in helping us to disengage from work and business pressures and get the process of true relaxation underway.  That could be visiting museums,  touring the city,  hiking,  touring vineyards,  browsing at the bazaar,  or whatever else strikes your fancy.

It’s also recommended that you unplug your electronic toys and take a break from email and voicemail.  You might miss something,  but you’ll get over it.  In exchange,  you’ll receive the many benefits our brains and psyches derive from decreased stress.  A 2009 Boston Consulting Group study showed that taking time off results in improved communication skills,  decision-making ability and problem-solving ability,  plus decreased burnout and stress and higher productivity. 

I guess we can sum it up by saying that if we don’t take a few days off work every now and again,  we’ll just get tired and cranky and less effective.  We also won’t absorb information or learn as well,  which is why public schools give students 5 days off every three months or so.

I’m happy to tell all of you that I finally took a vacation myself,  after not taking any time off in about three years.  I spent 5 days on the coast of Maine.  I did not check email or voicemail.  I also missed my friend Jeremiah’s party (damn!),  but what can I say?  I had a great time soaking up sunshine,  drinking wine,  eating lobster,  visiting art galleries and taking in the sights.  I feel so much better!

Thanks for reading,

Kim

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Business Books to Read Summer 2011

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Our Summer idyll will end in just a couple of weeks, but there’s still time to squeeze in some all-important professional development and maybe a meeting with a promising prospect, too.  Freelancers cannot afford to merely work hard when September rolls around.  We must also work smart.  I’m lucky to have discovered a trove of worthwhile business books that will make me smarter and I’m happy to pass along my take on what I’ve read.

The books will teach us effective ways to turn prospects into clients (sell only to VITOs),  how to devise business goals and strategies that will ensure our long-term success (because the red ocean is where you’ll drown)  and that  y=f(x) —and how to apply that formula to make both our own and our clients’ business processes operate more efficiently and profitably (what’s your sigma?).

The Borders book chain is going out of business, so why not make the most of that sad event and scoop up a few titles on the cheap? What’s not left on the shelves at Borders can be checked out of your local library.  Get started now on creating both a strong fourth quarter and laying the groundwork for a financially healthy 2012.

The Secrets of VITO: Think and Sell Like a CEO (2002)  Anthony Parinello
If Freelancers expect to convince decision-makers to award us assignments,  it is imperative that we understand what motivates them to hire us.  This astute and sophisticated book helps Freelancers understand the standard concerns,  priorities and mindset of the typical CEO or organization leader.  Learn how to win trust and convey expertise.  Learn smart ways to approach, persuade,  negotiate with and sell to those who can either veto or green-light our projects.

Blue Ocean Strategy (2005)  W. Chan Kim and Renee Mauborgne

Blue Oceans represent untapped markets and undiscovered customer preferences.  Who knew they craved Sony’s Walkman or Apple’s iPod until the marketing campaign told them so?  Red Oceans represent mature,  shrinking and highly competitive markets.  Remain there and your business will surely operate in the red and perish. This classic guide to innovative strategy development shows Freelancers,  business owners,  corporate execs and nonprofit organization leaders how to pursue fearless, rational and uncomplicated approaches that will redefine and energize strategic direction,  articulation of the value proposition, the business model and marketing.

Six Sigma for Dummies (2005)  Neil DeCarlo, Craig Gygi and Bruce Williams

Six Sigma is a highly sophisticated and exacting data-driven process improvement system that was originally designed for manufacturing companies.  However,  the system can be successfully applied to service delivery as well,  from hospitals and health clinics to restaurants and financial institutions.  Six Sigma will substantively minimize errors and inefficient practices in product manufacturing and service delivery systems.  The material is complex,  but the book is well-written and very clear.  I found that anyone whose work involves operations,  strategy or finance will benefit from exposure to the basics of Six Sigma, whether or not you become formally trained in its tenets.  You’re bound to gain useful insights on how to accurately measure, assess and streamline the delivery of your organization’s products or services.

Thanks for reading,
Kim

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Summer Reading List

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For just about all of us,  the school year Summer Break meant having fun: hanging out with friends,  going on picnics and trips to the beach,  summer camp and family vacations.  Yet Summer was not all fun.  When I reached high school,  Mom and Dad made sure I got a job every year,  so I would earn some money and learn the habit of saving when they insisted that I bank half of my paycheck each week.

Also,  students at my college-prep public high school were required to read two books  (from the school’s list)  over the Summer and submit a book report for each when we returned to school in September.  I’ve always been an avid reader,  so the reading assignment was never a chore for me  (although I disliked writing the book reports).

This year,  I decided to renew that tradition and get into some business-themed books.  It had been a while since I’d mined that category and I had the appetite to make up for lost time.  Here are three books I’ve read since June.  Maybe you’d like to suggest a few titles that you’ve found to be useful?

TouchPoints  (2011)     Douglas Conant and Mette Norgaard

Freelancers,  corporate execs,  nonprofit organization leaders and business owners all require leadership training.  This excellent and informative book provides first-rate lessons for experienced leaders and those new to the club.  Learn how to create a leadership model that reflects your unique style and values,  rather than merely mimicking a cookie-cutter template.  Learn how communication skills promote leadership skills.  Explore the existential question of why you choose to lead.

Knowing Your Value  (2011)     Mika Brzezinski

Although this book’s intent is to confirm that women deserve to receive appropriate financial reward for their professional gifts and teach them how to successfully negotiate a raise,  salary or contract fee  (and other perks)  that accurately reflect the value they bring to the organization for which they work,  I recommend this useful and enjoyable book for both genders.  The Haves are shamelessly using the weak economy to withhold money from the Have-nots and that means we all need to learn how and when and under what conditions we can respectfully request money and recognition  (plus a good title!).

Black Faces in White Places  (2011)     Randal Pinkett and Jeffrey Robinson

The title of this book is misleading.  It is not primarily a book about survival strategies designed to assist people of color who work in Euro-American dominated environments.  Randal Pinkett was the winning contestant on  “The Apprentice”  in 2005  and he is the only African-American to be named the winner.  The authors do speculate as to why no other  “Apprentice”  winner has ever been asked to consider sharing the prize.  Was it subtle racism?  Only Trump knows.  But who among us has not been treated unfairly at some point?  The authors posit that the most reliable way to triumph in life and business is to deliver excellence and that is the subject of this well-written,  dense and absorbing book.  Pinkett and Robinson  (who run a lucrative consulting firm)  provide a detailed roadmap that is applicable to Freelancers,  business owners and all professionals of all races.  Learn to identify your passions and your purpose,  nurture beneficial relationships,  develop and consistently deliver excellence and give back generously,  to pay it forward and mentor others.

I’ll be back next week with the rest of my Summer reading list.

Thanks for reading,

Kim

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More Smart Responses to Common Objections

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You’re a smart,  ambitious Freelance cookie and you’ve set up appointments this Summer with prospective clients who could award contracts that will pay you in fourth quarter and perhaps beyond.  You’ve thanked the saints for finally allowing you to sit down with a much sought-after prospect and the last thing you need is an objection slithering into your Garden of Eden,  ready to poison the victory.  Here are more smart approaches to common categories of objections that will help you put them to rest and start building a lucrative client list.

I.    Too Small

Your prospective client may be impressed with your insights and proposed solutions,  yet fear that your consultancy lacks the capacity to successfully execute complex projects.  There is a fear that the job you’re discussing is too big for your plate.  To counter,  reassure your prospect by emphasizing that his/her needs and priorities will always receive prompt and meticulous attention because all aspects of the project will be personally overseen by the principal—you.  Stress that you are always immediately responsive and able to elegantly customize all required services.  Furthermore,  should more hands be needed,  you have a carefully curated group of associates to call upon to handle specific tasks,  when necessary.

II.   No Money

Especially when looking to perform consulting services at not-for-profit organizations,  remember that meager budgets are an issue and the problem will continue to bedevil NFPs for the foreseeable future.  I’ve been burned by NFPs who’ve invited me in to discuss projects for which  (unknown to me)  there is no extant budget.  Getting reliable information about the financial reality may be difficult; even executive directors and board chairs can be evasive and coy about money.  They are not afraid to waste your time.

The game most often will be played by a small organization that has fingers crossed about receiving grant money.  However,  the hoped-for grant may not arrive and the client could disappear on you.  Protect yourself by trying to encourage transparency by breaking the project down into smaller bites.  Start by asking the NFP prospect what he/she would like to achieve and clarify what your role will be.  Diplomatically inquire as to whether a budget has been established for the project.

Next,  ask for project needs to be prioritized:  the  “must-do”,  the  “would be helpful” and “this too, if we can afford”.  In your written proposal,  package and price your services in ascending tiers,  thus scaling the project in accordance to client priorities and budget.  Clearly emphasize the ROI of the project and how it is an investment in furthering organization objectives and its future.

Thanks for reading,

Kim

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Smart Responses to Common Objections

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The savvy Freelancer knows to make hay while the Summer sun shines and contract assignments dwindle.  Registering for a conference that will expand your knowledge and your network is one way to make good use of your time.  Setting up meetings with potential clients that you’ve perhaps been pursuing since last November is another good use of your time.  Despite vacations,  I’ll bet they’re more available to meet you for lunch or coffee in July and August.  Summer is the time for Freelancers to sow relationship seeds that will be harvested as billable hours come Autumn.

Along the way,  we will unfortunately have an objection tossed onto our path by a skeptical prospect.  All may appear to be rosy until it’s time to schedule the appointment—and then your prospect balks.  “What is it that we’re supposed to talk about?”  “I’m not sure if we’ll have any of your kind of projects on the immediate horizon.”  Or maybe the stumbling block won’t get thrown at you until the face to face is on.  Whenever it happens,  your potential client will be in grave danger of fading away and  you’ll need effective CPR to save your budding relationship.

Fortunately,  client objections tend to fall into predictable broad categories.  To formulate a credible response,  you must first recognize the real question that underlies the objection— that would be the category it falls into.  There are only a handful of objection categories that Freelancers will most often encounter.  Take a look at these two:

I.     No trust

Your prospective client doesn’t trust you and questions your experience and abilities,  or might be somewhat cool toward you, because you are an unknown quantity.  The remedy is to obtain an endorsement from someone who is known and respected by your prospect.  If you sense that you are being held at arm’s length and rapport is not being established,  name a client  (or organization)  for whom you’ve worked,  one who could be familiar to the prospect.  If possible,  strengthen your hand by attending a gathering  (social or professional)  that the prospect is known to attend.  Proceed to let your prospect witness you interacting as a peer with colleagues and friends he/she knows and admires.   Your prospect will feel much more comfortable with you,  the ice will melt and you’ll soon be invited into the office to talk turkey.

II.     No need

Sometimes a prospect just wants to blow a Freelancer off,  so we’re told that there is no need for our services  (even though we know that’s not the truth!).  Other times we hear this objection because the prospective client doesn’t know us or have reason to trust us,  so he/she will fudge the truth and claim to have no use for what we’re selling.  Keep talking and don’t be shut down by this one if you know there is a need for your brand of expertise.  This client must be convinced of the value and ROI of what you bring.  If you’ve worked with clients who would be familiar to this prospect,  drop the name and briefly describe the successful outcome of your project.

Talk about the revenue stream that was created or the money that was saved or the market share gained.  Then ask a pertinent question in an area you suspect may be of interest and where your knowledge and expertise shine.  “What about _____ keeps you awake at night?”  “How do you and your team get your arms around…?”  Get this client to open up and talk about what’s really going on and you may find yourself in a conversation about how you might be able to help them out.

More on this topic next week.   Thanks for reading,

Kim

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Pareto’s Principle, or the 80/20 Rule

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In 1906,  the economist and sociologist Vilfredo Pareto examined wealth distribution in Italy and found that 80 % of that nation’s wealth was controlled by 20 % of the population.  (In the U.S. as of 2009,  the top 5 % of the population controlled 63.5 % of the wealth and the bottom 80 % controlled 12.8 %.  Source: The Economic Policy Institute Briefing Paper # 292,  March 23, 2011)  Pareto dedicated his career to exploring the nature of individual and group social action,  along with studying the distribution of wealth in society.  Pareto’s discovery came to be known as Pareto’s Principle,  colloquially known today as the 80/20 Rule. 

Pareto determined mathematically that while numerous factors are connected to any given outcome,  only a select few are able to impact that outcome in a significant way.  Anecdotally,  I think most would agree that the principle holds up in real life.  The 80/20 Rule has been widely applied in business and several truisms have been noted, including:

  • 80 % of your sales are generated by 20 % of your customers
  • 80 % of your profits grow from 20 % of your working hours
  • 80 % of your sales come from 20 % of your product/service line
  • 80 % of customer complaints emanate from 20 % of your customers

Are you trying to get in the door with certain clients who will award to you the projects and billable hours that will allow you to achieve your profitability goals?  Of course you are!  Maybe it’s time to apply the science of Pareto’s Principle to the pursuit of an expanded client list and limit the randomness of networking and prospecting.  As Pareto discovered,  it’s vital to identify those critical few variables that provide the majority of leverage,  or problem-solving power,  when trying to achieve objectives.  In this assignment certain assumptions will be made,  such as the strength of your value proposition and your understanding of who would be an ideal client.

Get the critical few variable identification process started by listing all possible factors that influence your ability to sign a client.  Next,  pare the list down by filtering out the “trivial many”,  as Pareto termed factors that will have minimal impact on the desired outcome.  You’ll end up with about a half dozen critical variables,  powerful factors  that when impacted,  i.e. leveraged,  in the right fashion by the right person will influence the outcome and get you an audience with the decision maker who can award you a plum contract.

Ponder the critical variables on your priority list.  They have the power to either clear your path or block your success indefinitely.   Which critical variables,  if any,  might you be able to leverage on your own?  Which are beyond your reach and require the intervention of an ally?  Are any variables likely beyond the control of anyone save the client?  When you’ve determined which critical variables might possibly be leveraged by either yourself or an ally,  then consider carefully which of those factors will be most easily leveraged and how you should proceed.  You’re looking to leverage 20 % of the critical 20 %,  if you know what I mean.

On my priority list,  there are seven items.   Three critical variables appear to be within my control or that of an ally and four appear to be outside of my ability to impact  (including budget limitations).  Introductions and endorsements to the right people are both my barriers and critical success factors and I see a possibility for leverage.

Over the past 6-8 weeks I’ve had two endorsement/introductions to potential clients,  plus a promise from an influential advocate to try to help me resuscitate a client relationship that derailed because of competing organizational priorities and budget limitations.  At the end of July,  I will attend a conference where I hope to meet a certain prospect and I hope that the right person introduces us,  i.e. someone my prospect knows well and who will provide an endorsement for me.   I am working the 80/20  Rule,  planning to leverage critical variables wherever possible.  Wish me good luck!

Thanks for reading,

Kim

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Love Thy Competitor

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If you are the type of Freelancer/business owner who believes that a primary business goal is to annihilate and destroy your competition,  then you’re likely destined to become a less successful entrepreneur.  Research can now demonstrate the wisdom of the adage,  “keep your friends close and your enemies closer.”

A 2004 study conducted by James Westphal,  professor of management at University of Texas/Austin,  examined CEO friendships in 293 U.S. companies and found that regardless of the intensity of competition within a given industry,  rival CEOs who formed friendships enjoyed distinct business-related advantages over those who shunned competitors.

According to Westphal,  not only is it possible to make friends with competitors,  it’s advisable.  He explained the advantages of friendships among rivals this way:  when business owners get together,  what do we do?  Talk shop.  We compare notes,  discuss what’s new in the industry,  talk about the economy and how it’s impacting customer behavior.

In other words,  by going to trade industry conferences and meeting,  greeting and getting to know rival Freelancers,  you’ll obtain information and get exposure to perspectives that can help make you more successful.  So think about following a bit of counter-intuitive advice and realize that business is not always a zero-sum game.  A competitor’s win does not automatically mean your loss.

If getting chummy with the competition makes you feel a little queasy,  then get friendly with a competitor based in another locale.  The distance will create a boundary that could make it comfortable for the two of you to trade ideas about cheap and savvy advertising options,  how to make your clients happy,  or how to take advantage of,  or protect yourself from,  market trends.

In some instances,  you may decide to collaborate with a competitor.  It’s potentially risky,  but forging a strategic  collaboration with one of your competitors can benefit the bottom line and help both entities to thrive.  It can be a smart expansion or survival strategy for Freelancers and other small business owners who are trying to remain viable.  Maybe there is a partnership you can set up with the right semi-rival?   It’s called coopetition.

Get to know a fellow Freelancer who works in your own,  or a related,  field.  It’s preferable if each of you has discrete strengths,  with limited potential for overlap.  Meet for coffee and broach the subject of joining forces to make money.  How can you combine your strengths and approach clients with an innovative and more desirable package?  There’s nothing better than giving clients more reasons to do business with you.

Collaborations can work in a number of ways.  Just a couple of months ago,  a lady named Julie presented me with an idea where we can add-on or up-sell certain of each others’ services.  There is potentially a complementary need in a market segment that we share and Julie wondered if some selective cross-promotion would be beneficial.  Together,  we’re hoping to gain entry to clients where separately neither could get in the door.

Another form of coopetition is establishing a referral relationship with a near-rival.  Accountants and bookkeepers have done this forever,  with much success.  Their functions have similarities,  but each party knows and respects the boundaries and knows how to work together.

Nevertheless,  do not be naive.  Take precautions and clearly define boundaries and expectations.  Watch your back and work only with someone you know to be trustworthy.  Also,  do not underestimate the potential for difficulties in establishing and sustaining a coopetition arrangement.  Assumptions about appropriate customer service or corporate culture can derail your best intentions.  Careful planning and execution are crucial if coopetition is to work smoothly.  In close collaborations,  a written non-disclosure, non-compete agreement will be essential.

Finally,  remember where friendship ends and business begins.  There will be sensitive issues that are best kept to yourself,  like new business initiatives or the  “secret sauce”  of how you deliver your unique services.  Keep your antennae raised as you and a worthy competitor mull over ways to share resources or expertise and boost profits in the process.

Thanks for reading,

Kim

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What’s Your Influencer Score?

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If you have a Facebook,  LinkedIn or Twitter account, get ready to have rating points assigned to your online presence.  There’s yet another way to keep score in this world and the newest yardstick is your social media reach. The rating system resembles a credit score or Google page ranking and it assesses your social media power and influence.  Three companies, Klout, Peer Index and Twitter Grader, will analyze and determine who the heavy hitters are.

Who are the movers and shakers,  experts and taste makers,  across a range of topics and specialties within a certain geolocation? Marketing departments want to know.  While authors, celebrities, politicians and athletes have traditionally been capable of influencing opinions on a large scale, social media have given a powerful voice to ordinary citizens and a new league of authorities has emerged.

The rating companies measure your Facebook (Klout),  LinkedIn  (Klout, coming soon)  and Twitter  (all three)  friends,  connections and tweets on their respective algorithms.  According to analysts at Hewlett Packard who tried to crack the codes,  a large network of contacts and friends is not the primary value of the influencer score.

Peer Index focuses on topic resonance  (how much interest you generate within your area of expertise),  subject authority  (perceived credibility and trust)  and activity  (how much content you generate within your topic)  in its ranking recipe.  If you’re looking to game the system  (you wouldn’t try that, would you?),  it is beneficial to become well known for a particular topic and avoid being a generalist.

In other words,  go narrow and deep.  Boost your influencer score  (and online brand)  by demonstrating knowledge and expertise,  trustworthiness and credibility and enthusiasm and passion for your preferred subject.

Furthermore,  demonstrate your ability to influence those in your network with calls to action and recommendations that engage and inspire followers and friends and cause them to spread the word about your choices and opinions.  Did you get out the vote for Obama or persuade people to join the revolution in Cairo? If so, then you are an influential social media darling.

Surprisingly,  blogs,  newsletters and YouTube are not in the ratings mix at this time,  but tweets and online profiles most definitely are.  The rankings of your connections and friends also factor impact your score,  as do the rankings of those who retweet you.

It’s possible to sign yourself up for free and learn your Twitter rating on Peer Index http://peerindex.net or Twitter Grader http://twitter.grader.com and your Facebook score on Klout http://klout.com.  The latter recently announced a deal to rank LinkedIn profiles  (I wonder if activity on the Answers Forum will be in the algorithm?).

So what’s in it for high scorers? Thousands of companies have already signed on to buy data and big influencers are positioned to receive all manner of promotional goodies.  As reported in The New York Times on June 26, 2011,  Audi will begin to offer special promotions to Facebook users based on their Klout scores.

Last year, Virgin America selected highly rated Facebook influencers in Toronto and rewarded them with free round-trip flights to Los Angeles or San Francisco.  The Palms Hotel and Casino in Las Vegas used Klout scores to choose Facebook influencers and give them either free room upgrades or free admission to Cirque du Soleil.

Nevertheless,  a corrective is in order.  While it is apparent that social media influencers exist and in certain circumstances they are able to impact the actions and opinions of others,  they do not necessarily live up to the hype.  Duncan Watts,  author of  “Everything is Obvious Once You Know the Answer” (2011),  asserts that the  “influencers”  do not always obtain impact through their expertise,  persuasiveness,  popularity or reputation.

Watts used computer simulations to model how information is likely to disperse through social media and found that the spread of an idea or story depends upon  “a critical mass of easily influenced people,  who in turn influence other easy-to-influence people.”  When this critical mass exists,  “even an average individual is capable of triggering a large cascade.”

Well,  so much for algorithms.  However,  it may be fun to sign up and get your influencer score anyway. You might somehow manage to get a high rating,  perhaps because you’re connected to other high influencers,  and get some promotional comps as a result.  But then again,  being connected to the right people has always  been how to get the goodies,  with or without social media influence!

Thanks for reading,
Kim

Professional Development , Leave a comment

The Ideal Network

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We’ve all encountered people whose primary goal is to create a vast network of  “contacts”.  These folks supersize.  They have an enormous collection of Facebook friends and they exchange business cards with everyone they meet,   inviting one and all into their LinkedIn network.

But what do their  “contacts”  actually mean to them?  Do such collectors of contacts follow networking best practices and act as a resource? Would they actually even recognize many of their  “contacts”  if they ran into them at the grocery store?  Too often,  the answer is no.

I’ve had the experience of being sucked into the clutches of a few super-networkers and found that when I emailed an easy and uncomplicated question,  my inquiry went unanswered.  Needless to say I severed the association but I’m sure my absence is neither missed nor even noticed.  Who can keep track of or maintain contact with 500 connections?

Well I’m happy to report that at last there is data that supports what has long been my gut feeling about networking.  Apparently,  when it comes to our network of relationships,  size matters and smaller is better.

Robert Cross,  Associate Professor at the University of Virginia’s McIntire School of Commerce and Robert Thomas,  Executive Director of the global consulting firm Accenture’s Institute for High Performance,  contend that the most effective networks focus on high-quality relationships,  ideally with people who come from diverse levels of the corporate and/or socioeconomic hierarchy.  Cross and Thomas found that a properly functioning network consists of about 12-18 people.  The ideal network provides guidance,  exposes us to fresh approaches to decision-making and problem-solving,  challenges us and also gives us validation and encouragement.

A diversity of professional and personal interactions pays numerous dividends,  socially and professionally.  We get to meet and rub shoulders with those who’ve lived different lives and therefore have different values,  perspectives and experiences.  We learn how to become more flexible and resilient.  Our decision-making capabilities improve because we incorporate additional information and we become better leaders and better business people.

Take a look at who you know and who you consider to be a member of  your network.  Who looks out for you and who do you look out for?  Cross and Thomas recommend that we cultivate relationships in these categories:

  • People who share or expose you to new information or expertise,  e.g.,  giving the heads-up on happenings in your business environment.  This could be a client or someone from the chamber of commerce or other business group.
  • Peers in other industries,  who can open your eyes to what other organizations consider to be best practices or smart business strategies.
  • Powerful people,  who can open doors,  make introductions,  cut through red tape,  provide useful inside information and mentoring.
  • Those who know and validate validate your work and can provide feedback and challenge you to get better (maybe a client,  peer  or boss).
  • Peers in a business similar to your own,  but who are based in another geography and therefore allow you to discuss business strategy and not worry about competition.
  • People who provide personal support,  good friends and family you can call on when things go wrong and you need to talk.
  • Outlets for spiritual and physical well being:  fitness,  meditation,  religion,  volunteering,  sports and hobbies.

As you review and perhaps revamp your network,  look to include people who bring good energy,  people who bring out the best in you.  Build relationships with people who see opportunities and know how to reach for them.  If you’ve been gestating an important goal you’d like to achieve,  think about who in your network can help you get there?  Is there someone you should reconnect with?

Most of all,   remember that networking is about building and maintaining relationships,  whether or not there is an immediate need to call in a favor.  Reciprocity rules,  so maintain contacts,  reach out and reconnect to good friends and colleagues and be generous when they are in need.

Thanks for reading,

Kim

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Face Your Financials

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Although you may have both an accountant and a bookkeeper on your payroll you, the business owner,  still bear the ultimate responsibility for maintaining the financial health of your enterprise.  Every business owner should be able to understand and make good use of business financial data.  Each financial statement has a story to tell and you the business owner must be able to decode the language and comprehend the information that the numbers relay.

There are three financial documents that are generated monthly  (and also compiled quarterly and annually): the Balance Sheet, the Cash Flow Statement and the Profit & Loss  (or Income)  Statement.

  • The Balance Sheet resembles your checking account monthly statement.  This document details business assets and liabilities,  showing the monetary value of all the business owns and what it owes.
  • The Cash Flow Statement is the business budget and shows what sales revenue will flow into the business and what expenses will flow out.  This document helps you stay on top of how much money is available to cover expenses,  like payroll and rent.  Accounts payable  (the bills)  and accounts receivable  (sales revenues)  are listed on this statement.  If you’ve ever managed a household budget,  then you can master the Cash Flow Statement.
  • The Profit & Loss  (or Income)  Statement is similar to the Cash Flow Statement.  It contains many items that are also found on the IRS tax form Schedule C,  Profit or Loss From a Business.  Sales revenues and expenses are listed on this statement,  including labor,  taxes,  inventory  and the wholesale costs of products sold.  Net Profit (also known as the bottom line)  is  the last line of this statement and this figure represents the ultimate story of business financial health.

One does not need a degree in accounting or an MBA in finance to identify which numbers on financial statements are most critical to your business and understand the story that each one tells.  Keeping track of five or six key values,  including values called ratios,  will do wonders for your comfort level with financial analysis and in the process,  guide your business decisions in many ways.

  • Gross Profit  in the P & L tells how much money remains after selling and product production costs,  or the wholesale cost of products sold,  have been tallied.  Freelancers calculate this figure as time: how many hours were spent on your contract project,  networking to create new business,  developing a new workshop? Make a reasonable estimate of the wholesale cost of your labor.  This figure gives insight into how much money/time  it takes to make a sale.  Can you work smarter and faster,  or buy materials for products manufactured more cheaply? That’s how to increase gross profit.
  • Net Profit,  or the bottom line of the P & L,  tells the ultimate story.  Every line item that precedes it impacts it.  If you want that number to be larger (and don’t we all?),  look at all expenses to see what can be trimmed and also consider ways to generate new business through strategic partnerships,  referral relationships,  networking for client development,  PR,  etc.
  • Gross sales revenues  in the P & L may be tracked in two ways,  looking back over what occurred in previous months or years  (historical comparison)  and going forward  (projections, or forecasting)  to what you reasonably expect and want to sell in a given period,  guided by sales history and current demand for your product/service.  Are you achieving,  exceeding or failing your personal sales goals?

Finally,  see your Balance Sheet and calculate these ratios,  to expand your grasp of the financial data:

  • Quick Ratio = Accounts Receivable + Cash – Inventory divided by Accounts Payable    This figure indicates how much money is available to pay bills.  A 2:1 ratio represents a business in good shape.  However,  a big receivables number can mask clients who take longer than 30 days to pay,  thus signaling the owner to step up collection efforts.
  • Current Ratio = Assets divided by Liabilities   This figure measures resources available to pay debts over the next 12 months.  A value > 1.0 shows a business in good shape,  > 2.0 is a business in excellent shape.
  • Working Capital = Current Assets – Current Liabilities   This figure also demonstrates the ability to pay off short-term debts.  Obviously,  a positive number is what you want.
  • Debt to Equity Ratio = Total Assets divided by Total Liabilities   This figure indicates how much debt the business carries relative to its assets.  A value <0.5 is excellent and values > 0.5 mean the business is carrying rather heavy debt and is considered highly leveraged.

Thanks for reading,

Kim