Tag Archives: work-life balance

Inventory Blues – Is Excess inventory Weighing you Down?

Ideally, you want to have as little inventory on hand as possible in your business. Afterall keeping a lot of inventory, ties down your money. Having to keep a large amount of inventory on hand means that your money is sitting idle and not making money for you.

Large Inventory costs also affects the value of the business. If in addition to the business, if they have to also buy a large amount of inventory, their return on investment becomes smaller and you have a smaller pool of buyer.

However, some businesses are unique and they need to keep a large inventory. For example, if your business is built on buying very old cars, restoring them, and selling them for a fat profit, you will try and buy old cars whenever they become available, restore these and then sell them for a fat profit. And you may have several years of inventory sitting with you.

However, a typical buyer who is looking for buying your business based on cash flow, will not only have to pay for the value of the business based on the cash flow, but also buy the inventory which may not generate profit for some time, but still needs the inventory to generate profits.

In such cases, one may have to come with some creative ideas.

We came across a similar situation where this Company services and sells refurbished equipment of a very specialized make that is currently not manufactured and the owner was contemplating selling his business. Based on current sales, the Company had 3-4 years of inventory in stock. One of the ideas that we suggested to them was that the they would create a supply / management agreement with the buyer where they would supply the refurbished equipment to the buyer over a period of time, and build in a profit component in it. It will be somewhat similar to seller’s note but with higher return as he is also providing some service. Otherwise the buyer would have  to pay over $2 million more for inventory for a business that is generating about $500K of earnings, and would be a difficult proposition.

Don’t be a Juggler!

juggler_juggling_balls

A common occurrence in many small businesses is that the owner makes all of the important decisions. After starting and building the business, owners are afraid to relinquish control. They do not feel that the others are capable of running the business like they can. So you are constantly juggling various tasks and making every decision.

This is what we describe in the Value Builder System as “Hub and Spoke” system. You as the owner are the Hub and everyone else is the spoke. This can also happen if you are not the owner but a manager where you are making all the decisions.

But what happens when you, the Hub, are away? Things don’t get done. And as a result you have a hard time to get away from work. You may not have taken a vacation in years.

Not only this is stressful to you, it is also very inefficient and demoralizing for your employees (or those who work under you). And more importantly, this will drag your value down value. Research by the Value-Builder team has shown that businesses following the Hub-and-Spoke model, where owners are in control of most of the decisions, sell on an average of 2.92 times their pre-tax profit. However, the businesses where the owner is not significantly involved in day to day operation and has management team and employees empowered to make decisions and running day-to day operations, sell on an average of 4.54 times the  pre-tax profit.

By making your business much less dependent on you, you can increase the value of your business by 55%! Not only that, you will have happier employees and less stress for you. You can now afford to take vacation.

But how do you do this? To start with, create operating manuals for your company. Write detailed procedures for everything that needs to be done. For each job function, you have a system or operating manual describing what needs to be done. Once you have these ready, train your employees to follow the processes and systems and give them the right tools. To quote Michael Gerber in E-Myth Revisited: “Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant“. How does McDonald’s delivers the same burgers and same experience across thousands of outlets – they have the system and procedures nailed down.

Making yourself as a business owner (or manager) less important and having a system in place is just one of the eight value drivers that improves the overall valuation of your company. If you are curious about what is your score on this ValueBuilder scale, take this 13 minute survey.

So long for now.

Yatin

 

 

 

 

Achieving Work-Life Balance – Parkinson’s Law

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Sometimes Less is more. Less time for work that is.

Today, work-day often is 24×7 affair, particularly if you are running your own small business. You are always checking your emails, answering emails from your prospects or customers. Although you may be seemingly enjoying your weekend or vacation, it is often hard to get away from work completely.

I used to be that way too. But lately, I have found that getting away from work completely, say for weekends or on short vacations, actually rejuvenates you and make you more productive. And you get just as much done in the allotted time, if not more. Remember the famous Parkinson’s Law: “Work Expands to fill the available time for its completion”?

This statement, first made in 1955 by British author Cyril Parkinson for an article for “The Economist” is one of the most profound observation. So when you reclaim your personal time to be spent with family, friends, and on non-work things, you end up compressing the time available to finish the work and you manage to do it!

This past memorial day was amazing. Our two sons were back from college and with us for a few days. The week before my older “twin” boy (older by 7 minutes),  declared that on Memorial Day, we were going to clean up both, our garage and basement. Our detached garage (which is actually used as a workshop and storage area) had become a complete mess – it was impossible to make your way from the front to the back). Basement had also piles of paper and stuff – things that we collect. So we had a three day deadline to clean up the mess that we created over past 10-15 years. Actually we got a late start on Saturday, but by 3 pm we had over half the stuff in the garage separated out as trash to be thrown out. And we discovered how great the “1-800-Got-Junk” was. While we were creating a giant pile in the driveway for a trash hauler, I was pleasantly surprised that I could book a time for Got-Junk people to come an haul away all the junk the same day in the 3-5 pm window! So with 3 pm deadline looming (which was just about 3-4 hours since we started our clean-up), we had to finish separating out the trash in just a few hours. And true to Parkinson’s law, we managed to do it. On Sunday, while my sons put up some organizers and shelves in garage and organized the tools and other stuff in the garage, me and my wife tackled the basement and got it completely cleaned and organized by Monday evening. One long weekend, two seemingly endless tasks, done very well and within the available time. One more victory for the Parkinson’s law.

Yes, with Teamwork, focused energy, and a hard deadline, we are capable of doing amazing things. But we are after-all humans – we need to be reminded of this often.

Do you find yourself procrastinating on things that must be done? Or always falling behind in your tasks? And always stressing out because things are not getting done? Or working all the time?

We needlessly stress out on things on our “To-do” Lists, make complicated plans, give our tasks unnecessarily long time lines and then put them off till the last minute because we fear tackling them.

Next time, just try these few simple things:

  1. Enjoy your weekends and reclaim your personal time. Get unplugged from your laptop or cellphones and get plugged in to your family and friends and hobbies
  2. Remember Parkinson’s law – You do have time to finish your tasks and goals. Give focused effort, compress your time-frame to get things done, rally your team members, and simplify your tasks and goals
  3. And keep reminding yourself about Parkinson’s Law every time you try getting stressedI love Nike’s slogan – ‘Just do it’. Instead of endless planning, just plunge ahead and start tackling things you are putting off.