Signs to Avoid a Customer

Unless we deal with them on cash, here are some signs of customers that you would like to avoid in your business:

• Check put on hold or being replaced
• Building contractors who immediately buy luxury cars after receiving downpayment
• Paying partial for every statement of account or choosing to pay smaller amount of invoices to be paid in a statment
• Transferring from one supplier to another
• Asking for immediate terms mode of payment for their first purchase
• Banks with over draft issuance of checks
• Business in existence for a long time, but bank account reference is still new

Do you have something to add? Or do you agree or not? Please share to us your experience.

The Burden of the Corporate Income Tax

BusinessWeek reports that the burden of corporated income tax has been 45% to 75% falls from the labor sector. While historically we think that it is the business owners and shareholders, Michael Mandel, after attending a conference shares why in a global economy it is the labor who is most getting affected. According to the conference study presented? The result of high income tax? - lower wage and salaries adminsitration.

Read the rest of the entry here.

Making Informal Solution Work than Strategic

I am faced with a business case study the past few weeks. I had just closed a 12-storey building deal that we supply them a material. However is running out of stock, checking it over at the principals headquarter it would take them two to three months to produce that item.

As a businessman, normally you would go for strategic decisions by asking recommendations. And in this case there are probably two ways you may decide to do - to continue to supply them by getting those items over at our counterpart distributor and lose (of course they will give it at a price higher than normal since they are our competitor) or no to continue to supply to them and get other products.

But how about starting to look at informal solution. In this case by asking someone from your company to buy those products without them having known that its us who bought? In this case we get it cheaper.

Essentially, I termed informal solution as "smart solution" a decision that is a result of quick thinking and smart moves. These may be the best solutions that one business can look at.

Knowing Your Winning Point

I am in an industry where winning point has always been the price. At any given time our clients buy from us and by the next time they buy, they buy from competitors who offers them a lower price. It sometimes even reach to a point where they dictate price. We offer them 100 pesos, then they talk to competitors if they can match our offer giving them 99. And talk to us again if we can match the competitor's and so on. Which always ends up customers having the least.

Our business is unlike the information technology business where winning point has always been your ability to respond and get back to customers irregardless of price. I had paused for a while, and thought that as we move along it is most important to take control of your winning point, in other words create and know your winning point.

Create in the sense that as a business you do not just rely on what is existing but innovate and create a new one like for instance making a more personal and closer relationship with the client as the one. And knowing this, will surely give you a slighter edge over others who thinks that its always about that price?

Creating an Environment of Healthy Competition

We are always thought that our competitors are our enemies in business. But more than that I think most importantly it is good for once to treat them as your partners. Here are two points I analyze on what would happen if one creates unhealthy competition:

Lost Value of Product. A product normally is being sold at certain price levels. However if one decides to sell it cheaper just to grab market, product losses value. I had just noted that the best business is gauge on how well a customer wants to work with your company without having to sacrificeprice.

Less Improvement in Market. Isn't it its always good to look at someone how he innovates his business? And gauge your performance based on industry and market standards? If you loss your competitor how can the market improve? What's your benchmark?

Higher Industry Closure Rate. (Less Profit Margin) When you dropped price, some companies might not be able to cope up with their working capital requirement that leads to more business closures in the market.

Treat competitors as your friends there is no way business environment can be enemies. But one important rule never share confidential business information!!!

Business is Business

An immediate family member owe us over $2,600 dollar over 100,000 in pesos money. The account has been in existence for over 2 years now and each time we collect and make a follow up it seems we had gotten already all reasons they could say. One interesting reason we noted was that they lost all the documents needed for them to process. So I see the value of keeping a copy for them to give. Though we still did not get the payment, I think they should realize that whether they lose the document, and we have to present our copy of document their responsibility and accountability of paying us has not been lost.

One of them noted that the guy responsible for payment has too a lot of problems. As I said business is business an no matter how many problems come in the responsibility of paying has and never will be lost.

When you do business or for would be entrepreneurs, remember that it is your responsibility to pay how much you owe in trade of goods and services! That is business.

Thinking and Deciding with Gut

As what known entrepreneurs Donald Trump and Jack Welch are known for, both "thinks with gut".

In his book, by Malcold Gladwell entitled "Blink" the power of thinking without thinking he contends that in most situations our snap judgments and first thoughts are better than that of the second and third one's. Thus, creating a better solution and decision.

I strongly agree with these people. And somehow I believe, in a way what

they want strongly to be inculcated is that the best thing someone can do is to make a quick decision. Most of the problem comes in when someone does not make any decision at all and get stucked.

Creating Surprises as a Strategy

Just the other day, I went on to eat Pringles its actually one of the hottest chips snacks manufactured by Procter and Gamble and imported here in the Philippines. It has been here for more than a score year already if I may not have mistaken. Over at the left side of the image was their old packaging, and just recently they created a surprise to consumers, by releasing a classical packaging on the right with just a two tone combination of red and white. Of course to them this is not a surprise, internally in their organization this is very well planned to create surprises so it may take notice for people to try to buy the product.

Similarly, speaking of surprises, Jollibee, just recently opened a new branch and one of their surprises to keep more people coming is that the Jollibbe mascot was creating traffic staying in between lanes of vehicles in the stores nearby street, and even putting a stand in front of cars until they give you a beep!

Creating surprises is definitely one good a strategy to continue the flame of burning eagerness to buy those products.

The Power of 9

Statistically, research says that on average it would take 9 advertisements to penetrate to consumer mind for them to react into trying to buy the product. The sad thing about this is that for every 3 advertisements you make, your advertisment is only being noticed once. Thus, means that 27 advertisements are needed for it to really take effect.

This serves as a guide for entrepreneurs or marketing personnel that while after say 20 advertisements they are on the verge of thinking that sales and profits aren't soaring, this is the time that your campaign has just started to kick off and take effect. So do not stop your campaign!

Entrepreneurial Ride

Entrepreneur. The cover got me during a book fair in one of the schools here. And now I'm enjoying reading this one heck of a magazine. Subscribing for one whole year, it doesn't cost that much. The articles encourage people to be entrepreneurs in these trying times, talks about some good business ideas, and success stories as well. It emphasizes bootstrap financing, where having limited capital shall not be a hindrance in doing business, but focusing on how you make your limited finances grow. Because after all, everyone of us wants 'to have money work for us' rather than 'us, work for money'.

The book though has its limitations though, not teaching people exactly how, but those ideas out there is an epitome of opportunities floating in air put into writing, definitely terrific, I'll give it an A!

The Z-Score Model

Ever since before, one of the topic I find really enthusiastic about is Finance. And after scanning through some books, its good to see me back on track with finance, my favorite subject where my professor has to exempt me in the final exam. (I hope I don't sound bragging) I actually want my blog to be some sort of informative to help out students in their feasibility studies, and business plans as well. So I had thought of sharing this article.

One disappointment of every business owners is financial failure, much more if a company doing good initially has to be shut down unanticipated.

So how do we anticipate? Through the z-score model formulated by Edward Altman. Where one calculates a score combining all the significant financial ratios for a firm. Some insignificant ratios may just be excluded from the calculation. What are these standard significant ratios? The current solvency ratio (a) of course is important, it determines what is the percentage of your company’s assets to your liabilities. Next is the inventory turnover (b) and asset turnover (c), the figure used to determine how well your inventory and sales is moving. Another is the debt ratio (d), the portion of debts over your company’s assets. And lastly the net profit margin (e), the percentage of income less all operating expenses.

So here the model goes: z = 1.0a + 0.1b + 0.5c + 3.0d + 10.0e. The figures multiplied to by the ratios are all constants.

All companies having a score of 2 or more are considered to be healthy while those who scored lower are considered to be in the danger zone. But the significance of the model is not that, but to forecast so if ever given 3 years forecast period, and found out that on the 2nd and 3rd year you have a score of 2 or lower, company can revise its operating plans and to something to improve its financial conditions.

However, take not that this has it limitations, if in an industry there are only a few healthy and strong firms that exhibited .9 to 2.0 range of score, this cannot discriminate and determine whether it really is healthy or not.

The Significance of Being Taken Cared of

The Hawthorne’s theory is becoming more and more significant in today’s dynamic work environment practically in increasing productivity at work. This is actually a management style where you let people feel that there is ‘someone’s taking care of you up there’. No, this does not limit only to human resource but this refers to the role of management in general – taking care of its people.

I can give you a good analogy for that, simply, its making people feel that they are being taken care of management and in turn people convince management that they do their job. Another is like, a policeman, where he makes sure that a pedestrian is safe in crossing, and in turn takes care of the vehicles through certain standards, and rules to follow.

So how did exactly this Hawthorne theory go about? Elton Mayo, one of the more known fathers of management, developed this theory if I’m not mistaken. Where he did experiment to 2 groups of people – A and B. A worked in a very bright, pleasant, air-conditioned place while B worked for in a warm unpleasant place. The productivity analysis showed that group A has a better output compared to group B. And the variance was huge.

Initial conclusion showed that putting more air-conditions, more fresheners, and lights increase productivity, but in the end it showed no improvement. Objective enough, Until after a few years they realize that the reason for increasing productivity was simply – employees feel that they are being taken care of!

Jumping in to Conclusions

One of the most horrible things that heppens in an organization is when you have people who jumps in to conclusions, acting upon a problem, and recommending a solution to a problem without facts, and datum. And in the end just realized that the problem is just a sympton, not exactly the problem. Thus, causing a wrong action plan.

I've always admire people who observes, analyze, gathers facts before jumping to conclusions, and if not for this Jollibee could have already hired a thousand people to serve a thousand customers, but unfortunately its not, they analyze, observe, research, and gather information and organized it in such a way that with a limited number of crews, they maintain quality service to thousand people.

Of course this goes with understanding how you make decisions. One thing I admire most with good employee (if you are?), is that they make decisions by filling in the shoes of the owner. My experience with Jollibee was great! When someone steals chicken, hotdog, ice tea, etc and ate it at the toilet, and a persons tells the manager, to the bad people, this is "sip-sip". But if you are a good employee, this is not an act of "sip-sip", but instead it simply means that you care for the company you worked for. You just have to simply ask this "What if I own the company? What trouble will this bring in my inventory?"

I hope you got what I meant. What do you think?

Siamese Twin in Management

I had just read a Management book from Weihrich and Koontz and it says that "Planning and Controlling are the siamese twin in management".

Planning and Contorlling bridges the gap from where we are to where we want to go.

There's no use to attempt to control without a plan because there's no way for us to tell where we are going.

What do you think?

Effective Management

I am actually thinking about this: ''You know your are effective when people fear you''.

This all started during a discussion when one person, person A, prefers to talk to me and a fellow regarding his proposal. He doesn't want to talk person B regarding his proposal, then I started to consult B on what are the probable issues and reasons why A doesn't want to talk. After a few minutes of thinking, suddenly pops out in my mind that B is actually a person feared for.

I keep asking on myself why is he feared for? Then came an answer simply because he is an effective manager. Thus, believing ''You know your are effective when people fear you''.

Thinking all over again, I know I have to work things out to be effective and not just giving always a 'yes' as what I have known for.