In this article from E-Myth Worldwide, the first recommendation is to start with expenses – not revenues. We couldn't agree more.

Budgeting for Fluctuating Revenue | E-Myth Worldwide.

At a recent Q&A session with small business owners, Andy and I challenged these small business owners to tightly manage their businesses "above the line" and "below the line." It is a lean way of thinking that we have advocated for more than ten years, but never has this concept been more poignant for small business owners than it is today.

What this means is that in your small business, you can manage profitability in two primary locations on your Profit and Loss Statement…

As a small business owner, the first way you can create greater profits is by controlling your expenses: lower expenses for the same revenue equals higher profits. For us lately this means using Hotels.com for EVERY hotel stay in order to get every a free night for every stay. It also means the absolute best rates and free upgrades for last minute stays because they have a price-match guarantee. This saves at least 10% on hotel stays, but in our practice, we pay for the lower cost nights and exercise our free nights in pricier markets like an upcoming trip to Chicago, for instance.

It also means doing smart things like changing office light bulbs to energy efficient bulbs, turning the heat and air up or down a few notches, negotiating better rates for Internet and telephone service, selling expense yet rarely used equipment and much more. Look at every expense in your business and seriously consider if it is a requirement – and if so, what is possible at all to reduce its cost to your bottom line? Saving $20 a month x 12 month is $240 that would be a nice bonus for a valuable employee – or pay a lightbill one month when things are tight. It is cash in your pocket that you don't have to spend. Every nickel counts.

Above the line, you must manage margins on your products and services – you must minimize the cost of goods sold – the direct costs of the product, the people who produce or deliver the product, etc. without sacrificing quality, service or customer experience. For us, this means making the decision to outsource specific tasks instead of hiring a new employee. Employee costs are rising, but outsourcing has never been more affordable. It is less expensive to my customer – and increases our efficiency and customer service to have some tasks outsourced. It also means negotiating with vendors who provide you with the good and services you re-sell…things like shipping, payment terms and other seemingly "minor" details can cost 10% or more on the bottom line. Take the time to negotiate these issues and maintain healthy relationships with all vendors to assure that you retain the privileges far into the future regardless of what other obstacles your business may face.

Most importantly, you can do none of this if you don't have a written account of your income, cost of goods sold and overhead expenses. You must do this – and with this, you can prepare a budget and cash flow projection for the months to come. Here at HALO Business Advisors, when we have assisted a client with the preparation of one of a cash flow projection and the client accepted it based on the goals THEY set for their business, we have NEVER had a client not achieve this cash flow projection. It is truly one of the most concrete and fulfilling elements of our coaching relationships – because we know how well it works – and we never grow weary of watching our clients' succeed.

Small Business Tip: The bottom line? Make the greatest margin you can make on the goods and services you sell while spending the least amount on the overhead expenses of your business. A constant and watchful eye on these two points of your finances will assure profits at the end of the year.

Lately, we’ve advised several clients during the hiring process of management or key position employees. Several key recommendations ring true regardless of the position or situation.

1. Always have a written job description – both specific to the job and specific expectations that you have for every member of your team.
2. Always have a written employee guideline with everything from "how to’s" for the specific job to company policies like time off requests, breaks, personal phone calls and more.
3. Have a system in place to handle employee problems – from the beginning.
4. Make the new employee sign the guidelines as if it were an employment contract – agreeing that they’ll do those things or that you have reason to dismiss them according to your system.
5. Place a compensation structure in place that will allow for the extra expense and time you’ll have to invest in training the employee, gives them a trial period, short term performance reward, a long term performance reward and a regular system for review.

The most important thing to remember, however, is that you have, as the employer, must set the standard for performance, enthusiasm and also have the guts to enforce your own employee guidelines. This is no time for Mr. Nice Guy. When you allow one employee to break the rules, either the others will or their morale will fail. To let one get away with problems isn’t lenient, it’s detrimental.

I was reminded of that in a blurb in October 2007 issue of Money Magazine. The article, entitled "Vacationing on the Job" said:

Ever wonder why it takes so long for accounting to process your expense report? It may be that they’re too busy searching the web for airfare to Hawaii. In a new survey from Salary.com, 63% of those polled admitted that they waste time at work, fooling around for an average 1.7 hours in an 8.5 hour workday. Over a year, that’s 50 extra days of paid vacation – not counting that trip to Maui."

Around here, we talk a lot about eliminating the waste of time and money from our businesses and organizations… well, here’s one place to start – keep your employees productive every minute they’re on your clock – and you’ll save time and money all at once!!

Several years ago, I read Jackie Huba and Ben McConnell’s terrific book, Creating Customer Evangelists. Their message resonated with me, and it’s mantra has long been integrated into our consulting philosophy working with small businesses and non-profits organizations. In their book, the very first rule of thumb is to "continuously gather customer feedback."

This week, while wrapping up my weekly grocery shopping trip at the local Sunflower, our independently owned grocery store, the bag boy said (yes, they actually pay young men to carry your bags and load them into the car), "Can I ask you a question?" Of course I said "yes." He said, "Why do you shop at Sunflower?" I looked at him kinda funny (you can imagine the wheels were turning in my head), and he said, "I mean, why here and not Wal-Mart?" So, I gave him my feedback (of course I had some): it’s locally owned, the store isn’t huge, I can find what I need, get in and out quick, people are friendly, meat department is the best around, and of course, the service – the customer experience – checkout, bagging, loading into my car… He smiled and said, "Great. That helps a lot. Have a great day ma’am."

Now, there’s a new twist on the customer survey. I can’t tell you how many of business owners have told me that they couldn’t get their sales associates to ask those questions – the "how did you hear about us" or "what made you choose our store over another" or "what was the best part of your experience today?" questions. But you can. There is no excuse. If the local Sunflower grocery store can get their bag boys to ask customers those questions while carrying bags to their cars, any business can achieve this. Compile that information – and do something with it.

Small business marketing tip: Be bold and gather customer feedback – not just on written surveys, but verbal ones. Let your customers know you listened and tell them what you did with the information. All of a sudden, your customers will become more engaged, more loyal and start, well, evangelizing about your business.

Study reveals several empty downtown units – Marietta, Ohio (great investment opportunity!)

Lumberton to seek redeveloper for 8-acre site on Main Street – Lumberton, New Jersey

Commission approves two new projects in Main Street Corridor (including Starbucks) – Bloomington, Illinois

Upscale Tresca tempts Main Street diners – Hillsboro, Oregon

Report: Tennessee’s State Main Street communities generate $82 million

Restaurateur honored for work downtown – Nashua, New Hampshire (great case study of a visionary – and every downtown needs at least one!)

Downtown dreams – Eugene, Oregon – a great discussion on how to approach the public/private partnership and discussion of planning and redeveloping a downtown area – no answers, but good thought process outlined.

How people view downtown is revealed – Defiance, Ohio – a great look at how to publicize survey results – and some of the ideas/questions to target in a downtown survey.

Letter to the Editor "Last-minute change on buffers wrong" – Lake Stevens, Washington – a great example of how to hold public leaders accountable and remind them of the importance of valuing the public/private investment. In case you’re fighting this battle right now or a similar one – know that you aren’t alone and see a great letter that publicly faces the hard issues.

Development Firm Continues Downtown Commitment; Two New Eateries Open in Detroit – Detroit, Michigan

Sometimes I get blurry eyes when I present the idea of Lean Thinking at my small business marketing seminars. At HALO, our entire marketing philosophy and coaching programs are based on lean thinking.

Matt over at 37signals wrote an article that might help remove some of the haze – he summarized the Toyota way of doing things (all based on Lean Thinking). Here are some excerpts from the article and comments.

Take a personal interest in your customer experience…

"Toyota’s chief engineers consider it their responsibility to begin a
design (or a redesign) by going out and seeing for themselves — the
term within Toyota is genchi genbutsu — what customers want in a car or
a truck and how any current versions come up short. This quest can
sometimes seem Arthurian, with chief engineers leading lonely and
gallant expeditions in an attempt to figure out how to beat the
competition."

Back office efficiency leads to success on the sales floor…

Improving efficiency in the factory, though, doesn’t
necessarily lead to greater profits. Savings on the assembly line can
mean a nicer dashboard without making the customer pay more for it. “If
you’re efficient in the things the customer doesn’t see, then you can
put it into the things the customer does see,” Ron Harbour, a
consultant whose company rates the efficiency of auto plants, told me.
A result is a car more popular with customers. Success on the assembly
line, in this way, begets success in the showroom.

Eliminate waste wherever you can and build a rainy-day fund…

Toyota’s systems and worldview derive from an
economy of scarcity. In 1950, the company’s near-bankruptcy during a
difficult year further defined its philosophy of frugality. Toyota soon
began to focus obsessively on reducing muda — or waste — and building
up a vast storehouse of cash for security.

The message really is as important as the media…

Toyota’s executives recognized early on that
improving the process by which cars are designed and built is just as
important as improving the vehicles themselves.

And from the comments – I hope this applies to us here at HALO…

”….the Japanese concept of the three actuals—go to the actual place,
work with the actual people or part and understand the actual
situation.” —Speed!

Last week a client of mine described what she said to another small
business owner about working with me: "I warned her not to expect
immediate results. That the first part of the coaching relationship you
made me muck through a bunch of stuff I didn’t want to do. But now that
it’s all come together, the results are huge." It’s that lean thinking
being applied.

Are you a Toyota? I hope we are.

Another leadership article on USNews.com on Warren Buffett – these are some good stories, and this guy is the real deal – a true American success story.

Here are some excerpts from this article, and I hope that you’ll apply Buffett’s principles of honesty, transparency, customers first, and long-term planning to your small business. You’ll enjoy the profits for years to come – and maybe you can give some away a little, too.

He rarely invests for the short term or changes his mind. But what is
less familiar to the public is his generosity of spirit to others, from
students contemplating their careers to new CEOs facing difficult
challenges.

–

"Money aside, there is very little difference between you and me in
terms of lifestyle. I eat simple meals. I drive a regular car. I make
decisions, and, yes, I, too, make mistakes."

–

Then Buffett offered the young student advice he won’t forget: "Be a
nice person, Vitaliy. It’s so simple that it’s almost too obvious to
notice. Look around at the people you like. Isn’t it a logical
assumption that if you like traits in other people, then other people
would like you if you developed those same traits?"

–

Mulcahy later confessed that she had hoped Buffett would put money into
Xerox, in spite of his well-known aversion to investing in technology
companies. But the advice she got proved more valuable. After listening
patiently to her problems for two hours, Buffett told her, "You’re
thinking that the investors, bankers, and regulators are the people you
need to survive. Put them all aside, and give priority to talking to
your people and your customers about what is wrong and what you have to
do."

–

He focuses on companies with a sustainable competitive advantage and
believes the quality of their leadership is integral to their value.
Unlike the vast majority of acquirers, Buffett retains the management.
A master evaluator of people, he asks them, "Do you love the business,
or do you love the money?"

–

When Salomon Brothers was embroiled in a scandal with the U.S. Treasury
Department, Buffett stepped in on a Sunday, took over as chair,
installed a new CEO, and saved the firm; he offered federal
investigators full disclosure and waived attorney-client privilege,
enabling the firm to avoid criminal indictment. He told Salomon
employees: "You don’t need to play outside the lines. You can make a
lot of money hitting the ball down the middle."

http://www.usnews.com/usnews/news/articles/061022/30buffett_3.htm

Don’t forget to read the rest – Buffett talks about mistakes and there is more on the turnaround of Xerox and Buffett’s other feats and accomplishments. It’s a good read – and it’s great advice for you and your small business.

I ran across a couple of articles on some great leaders that are using the lean thinking style – simple, customer-centric management and marketing to revolutionize their large businesses. It seems to me that if Proctor and Gamble can recover from an entrenched old-style culture in an international multi-language setting that your small business should be able to take a dose of the same medicine to create loyal customers, high customer retention rates, customer evangelists and high profits for your company. So, here are some excerpts from this great article to whet your appetite. I hope you enjoy these as much as I did (next article on Warren Buffett is in my next post).

How’s this for the KISS principle of leadership? "The consumer is
boss," Procter & Gamble Chief Executive A. G. Lafley says simply of
the business mantra he endlessly repeats to his employees.

–

Take, for example, a recent meeting he had with his executive
speechwriter, Greg Icenhower. The two got together to complete an
unfinished paper by Drucker.

"Greg was immediately thinking about all the usual stuff," recalls
Lafley. "Where should we publish? When should we publish? How should we
organize the piece?"

"So I said, ‘Greg, let’s begin at the beginning. Who is the piece for?’"

–

The proof of Lafley’s approach is plain enough. Since he took the
helm, P&G has not only doubled the number of new products with
elements originated outside the company but also more than doubled its
portfolio of billion-dollar brands-and its stock price.

How’s that for a simple recipe for success?

Read the full article here: http://www.usnews.com/usnews/news/articles/061022/30lafley.htm