How to Get High Returns on Your Hidden Assets

The summer is over and it is the perfect time to take a fresh look at all of your assets, bring in new perspectives, and get the resources you need to improve your business now.  This is the time to focus on your most important, highest return projects.  Don't wait until you clean up all your other loose ends.  Stay out of the trap of working on your lowest priority projects before getting to your highest priority projects.

This newsletter is designed to give you some tangible and valuable ideas on how to break out of this trap, focus and move ahead on your high payback projects today.

During our 20+ years of consulting with many small, medium and large businesses we have been able to identify and take advantage of many significant opportunities to help CEO's bring their major projects to fruition.  We are often the turbo-charger to get more out of all of your assets to help you realize your goals.  For example, many times we find that our clients have unrecognized and underutilized assets that they already have paid for and we help them to increase their returns significantly, as follows:

• Fully utilizing your employees' knowledge:  the employees frequently know more about the business, on a collective basis, than the CEO and are a tremendous untapped source of valuable information.  But it is extremely difficult for a CEO to find out what the employees are really thinking or to get past barriers built up over the years.  By  bringing in a consultant to team with employees, the CEO is telling the employees that: he/she respects their expertise, is serious about wanting their input, there are new opportunities for employee advancement and visibility (by providing new ideas) and that the employees can speak confidentially, if desired, for the benefit of the company and themselves.  Tremendous value can be generated in many areas because:

1) Employees will provide their knowledge on issues that go beyond their current role.  They frequently have a storehouse of untapped information from having many face-to-face/first-hand meetings with your customers and vendors.  During these meetings and discussions, they get valuable feedback on product pricing, quality, delivery timing, product features, packaging and potential add-ons.

2) Employers working in teams can take some of the burden of innovation and implementation off of the CEO.  They will pull together and commit to achieving success instead of pulling in different directions.    

3) Employees don't like to use a suggestion box.  They want someone to discuss  their ideas with them to try to implement them in a practical manner.  With a demonstration from the CEO that each idea will be taken seriously, they will often come forward with great ideas for potential innovations, cost reductions, new efficiencies, decreases in "shrinkage", better usage of inventory and methods of collecting receivables.  

• Breaking through your managerial constraints: your company now may be limited more by the lack of middle management resources than a lack of cash, but this constraint often can be broken quickly. CEO's frequently are afraid to give much more responsibility and authority to their management team.  On the other hand, with the help of an experienced consultant, these managers could succeed more easily and free-up more management time.  They will be able to take on more work and help you complete your high-return special projects.  This also would cause the rest of the business to be managed much more effectively.  Without this boost, however, it will continue to be very difficult to get more out of your existing management team.  

• Increasing your return on professional expertise: Your company probably already has paid for at least four outside advisers (your banker, accountant, attorney and insurance broker) to go up the learning curve on the intricacies of your business.  After working on your company's investments, business plans, financial projections, acquisitions, divestitures, real estate, financial statements, tax returns, audits, employee disputes, benefit plans, collections, etc., these professionals are a tremendous storehouse of knowledge and ideas about potential business improvements.  With a small amount of guidance from an experienced management consultant experienced in working with other professionals, a CEO could use these professionals judiciously but much more effectively, rather than try to keep them at bay.  This could significantly improve your return on your investment in these professionals.  Your already have paid them to go up the learning curve--these professionals are often-overlooked assets.

Paradoxically, CEO's sometimes try not to involve these professionals in their business in an effort to reduce cost.  This is the equivalent of buying a large, expensive and flexible piece of equipment for one application and then purposely trying to never use it again.   

• Strengthening knowledge of your competition:  Salesmen, engineers and others in your company have a substantial body of knowledge about competitors' product features, pricing and upcoming new developments.  They also  have many contacts outside the company through which they could get highly valuable additional information.  If you seek out this intelligence and communicate it across departmental boundaries as an integral part of your business planning process, your management will be much better informed and your investments will generate much greater returns.

• Tapping your customer and vendor relationships:  CEO's frequently miss opportunities to gain assistance from two of their most important stakeholder groups, their customers and vendors.  This is because CEO's jump to the conclusion that customers and vendors will abandon them in a heartbeat at the first hint of trouble.  The reality is that this is not the case--customers and vendors also have developed a strong reliance on you because you, in turn, are one of their stakeholders too.    

Vendors know that many other customers, particularly in this economy, also are having great difficulty and they know that it would be hard for them to replace you.  They also may have tailored their company to meet your needs and it might take a long time before they can replace you and collect from their new customers.   

Your customers also have come to rely on you and trust your processes and quality. Their personnel may have built strong relationships with your employees and they may not want to change.  

Momentum is on your side with both your customers and vendors.  They generally want to help you.  For example, they can slow their collections of receivables from your company and can speed up payments of payables to your company, etc.  This additional credit may not be available to you anywhere else. But, you must communicate with your customers and vendors properly and build their confidence and trust.  If they think that you are taking advantage of them they will run the other direction as fast as they can.  

• Freeing up wasted resources in your underutilized buildings and equipment:  Buildings and equipment often are much larger and more sophisticated than needed now because they were sized and priced based on your needs before the economic downturn.  They are likely to remain too large and more expensive than needed for years.  This represents your sorely needed cash that is trapped in these assets.  Through effective planning and negotiation, you often can eliminate this cause of waste and free up valuable resources.

Judge OKs sale of Silverdome - theoaklandpress.com

Judge OKs sale of Silverdome - theoaklandpress.com

Turnaround of the Year Award Presented to Fred Leeb & Associates

Press Release

The Turnaround of the Year Award was presented to Fred Leeb &
Associates for its work to orchestrate the successful turnaround
of Starfish Family Services located in Inkster, Michigan. The
turnaround team consisted of: Fred P. Leeb, Fred Leeb & Associates, LLC-- Starfish Interim CEO and Geni Giannotti, Fred Leeb & Associates, LLC-- Starfish Interim COO

Fred Leeb said, "It is extremely fulfilling
periodically to take on a challenge that not only helps business
but also helps the community where the needs are greatest."

Bill Mitchell, the Starfish Chairman of the Board, said, "We could
not be happier with the results achieved in such a relatively short
time.... Our relationship with our bank is excellent. Our
relationship with the various government agencies that fund our
operations has greatly improved as our financial condition has
improved. Our auditors are happy with the turnaround.... You
were a true partner with the Board and we are very grateful. I
can recommend you without reservation...."

The Top 30 Indicators of 
Future Financial Problems

 

By Fred Leeb

 

Many organizations today are facing extremely tough financial and operating conditions that are only likely to get more difficult.  In this kind of environment, it can become too easy to fall victim to denial--just buy time, make do, cut corners, rely on the business cycle to improve eventually or count on the big deal to finally come through.  The difficulty in achieving success may cause leaders to ignore reality or bury themselves in day-to-day minutia so they can remain in their comfort zone and continue to whittle away at familiar issues in their own way.  Sometimes, however, these practices may actually cause executives to continue using the wrong tools and go on the wrong path without even knowing that the situation is getting worse.  They may not realize that other solutions may be much more effective or that they are not even working on the true underlying problem. 

The purpose of this article is to serve as a periodic reminder for CEO's and CFO's (much like a pilot's pre-flight checklist) to help them foresee financial problems looming on the horizon before they take the plane up in the air.  Even the most experienced pilots recognize they need to:

• Use their checklist so as not to take anything for granted-they know that the passengers are relying on them and that the smallest problem eventually may cause a disaster if left unchecked. 
• Take the checklist process seriously because the it is the culmination of lessons learned--serious errors made by other pilots, experience on the likely causes of failure and the potential benefits of fixing/maintaining key elements before takeoff. 

The Checklist-The Top 30 Indicators of Future Financial Problems
Strategic Issues

    1.            Existing strategies are not taken seriously and they are not even widely-known by employees.

    2.            Management has not collected any data to prepare thorough analyses to prove and test its view of the future.  Management believes that the organization's strengths and weaknesses today and for the future are the same as those that existed five years ago.

    3.            No serious efforts are being made to identify the strategies being pursued by the major competitors or to foresee the impact of their strategies-there is no definitive understanding of how the playing field will change in 3-5 years.  

    4.            Reinvestment has been cut to the bone or eliminated even though this will make it even more difficult to compete in the future (e.g., IT upgrades, new production equipment, or a move to a more desirable location are considered to be out of the question).

    5.            Nothing is being done to attract and retain excellent employees (e.g., no promotions, raises, training, opportunities for greater responsibility, recognition, appreciation).

    6.            No thoughtful contingency plans have been prepared.

Organizational/Morale Issues

    7.            The CEO believes that he/she must carry the entire organization on his/her own shoulders because the CEO believes that other employees do not care as much or can not be relied upon in difficult situations.  The CEO is the only remaining after 5 o'clock.

    8.            In the last few years, employees have not offered any new ideas or suggested new ways to expand the business significantly.

    9.            No money is budgeted to enable significant change.  Success is considered to be just achieving last year's results and no real growth has occurred for years.

10.            Most of the employees believe that they do not need to be concerned about success and have no sense of urgency because management has not given them information as to whether performance has been good or bad.

11.            No obvious actions have been taken to renegotiate purchase agreements, sales contracts, loan agreements or leases and nothing has been done to cut unnecessary overtime or employees that everyone knows to be dead wood.

12.            Wages have been frozen repeatedly merely because that is the largest controllable expense item.  

13.            There is relatively high turnover in important positions because people are frustrated by family members and friends filling many key slots; family members are well-paid even though their achievements have been mediocre and they have little expertise or relevant experience.

14.            Employee morale and pride are low.  Even the green plants inside the office are scarce and unhealthy, offices are not clean and the landscaping outside is overgrown and full of weeds.

Financial Issues

15.            The strategic plan does not incorporate this year's annual budget and the strategic plan does not include financial projections.  Financial data is not used for decision-making.  It is comprised primarily of historical rather than projected results, is often available only long after the period is over and it is not tied to the budget in a meaningful way.

16.            Operating personnel believe the budget and financial plans are not for their benefit and they are neither familiar with nor responsible for projected results.  Operating people have their own means of measuring success but these are often unreported and informal.

17.            The financial personnel are not working as team members with other functional departments to identify and resolve key issues.

18.            Financial information consists primarily of the income statement and little or no serious consideration is given to understanding the impact of the balance sheet or cash flow statements.

19.            The cash flow presentation uses the indirect method based primarily on changes in balance sheet accounts such as accounts receivable and inventory rather than cash inflows from collections of accounts receivable and outflows for payroll, benefits, taxes, materials, rent, etc.

20.            Typical collection periods for accounts receivable have been getting longer and a large chunk has remained uncollected for a long time.

21.            The proportion of accounts payable over 90 days has increased over time and a major portion has not been paid for a long time.

22.            The company is borrowing from the government by not paying withholding taxes, property taxes, or income taxes.  Paying penalties and interest to vendors have become a normal cost of doing business.

23.            Required reports are not being provided to the bank on a timely basis. 

24.            The credit line is constantly at its maximum and is viewed by management to be perpetually inadequate.

Outside Stakeholders

25.            The board is comprised primarily of close friends and family members of the CEO.  Prominent businesspeople do not want to be associated with the organization and it is extremely difficult to recruit them for board or advisory positions.

26.            The CEO does not take seriously the auditor's findings and management letters.  The auditors, therefore, work to be done and out of the organization as quickly as possible, minimizing their added value.

27.            Outside attorneys have been chastised by the CEO for offering any suggestions based on their knowledge of the business. Attorneys must wait until they are asked a specific question because they believe that the CEO's top priority is for them to minimize their fee on the crisis at hand.  It makes no difference that the problem could have been avoided completely if addressed earlier.

28.            Vendors are constantly screaming for payment because they have been trained to do so-management has not been able to articulate a reasonable plan to help them understand how much or when they will be paid.

29.            Other vendors and employees have given up on informal negotiation processes and believe they must litigate.  Cases do not get resolved even though legal fees have been ramping up.

30.            No other organizations have been offering to form alliances or joint ventures with the subject company-they do not see strengths that will be advantageous to them.

The Bottom Line

The first and most difficult step towards true success is recognizing that there may be problems lurking below the surface that are not obvious without an experienced guide and a checklist.  Sometimes other points of view and analyses may be extremely worthwhile even if it means a slight delay in getting the plane airborne.  Generally, CEO's are highly capable, successful people who already are doing their best to do well.  With a guide and a checklist, however, they can step outside of themselves periodically to rise to the next level of success.     

  

An experienced consultant can provide:

• Valuable perspectives to help make a prudent decision,
• Manpower to get the job done with a sense of urgency at a critical juncture ,
• New ideas and creativity from understanding how other organizations have faced similar issues,
• Objectivity needed to get past roadblocks and vested interests and gain the most value for the organization as a whole, and the
• Confidentiality for your employees so they can be forthcoming with many new ideas and procedures without fear of criticism or retribution.

The best leaders are those constantly looking for good ideas everywhere and constantly learning from others.