Measure your "Spread"

A quick measure of your business’s health is to measure your “Spread”.  

Cash + Receivables – Payables = Spread

Receivables are a predictor of how much money is coming in soon.

Payables are a predictor of how much money is going out soon.

Cash is how much you have.

The net is like looking out the windshield to see what is coming, while financial statements are looking in the rearview mirror at history you can’t change.

If your Spread is negative, you are in trouble.

The goal is not to get the Spread as high as possible, but to keep it at a number that is safe – where you know you won’t run out of cash and have some reserves should things slow down or surprises come up.

If you know you are going into a slow season, you may let your Spread rise higher than normal.

Assuming your company is profitable, the valve you have to adjust the Spread is whether you are taking any money out, usually in the form of distributions to shareholders.  You could also decide to pay for capital investments rather than finance them depending on your Spread.

If your company is losing money, your Spread is likely low or negative.  The only tool you have then, broadly speaking, is to fix your business and make it profitable by one or more of the following –

Raise prices if your gross margin is too low.

Lower direct costs if your gross margin is too low.

Lower fixed (indirect, G&A) costs if they are too high.

Increase sales if your gross margin is ok and you can’t trim indirect costs any further.

Increase the size of your average sale.

Increase the number of sales.

Increase the frequency of sales from the same customer.

Increase sales while keeping fixed costs the same.

Lower fixed costs while keeping sales the same.

Some combination of all of these.

More on the “Spread” tomorrow.

What are you moving toward?

If your business were perfect, what would it look like?

In its major dimensions, what would be different than it is now?  Quantify each measure.

You gotta’ have a dream, to make a dream come true.

What are you getting up each day to try to make happen?

It doesn't get more complex over time

Once you start doing well, don’t forget what got you there.

It takes a keen unwavering focus on the basics to sustain success year in and year out.

Your most powerful sales edge

Look in the mirror – that is your most single powerful sales edge.

The competition may have similar products at similar prices, but they don’t have YOU.

Become a person that people really want to buy from.

Listen, care (and show it), go out of your way, work hard to help before they have to make a decision, and be a good human being.

To like people you have to like yourself

Yesterday we talked about how a great leader really likes the people he/she leads.

Today, I need to point out that to love people, you have to love yourself first.

That’s why we talk about you taking care of yourself first, getting your life in order, and working on your own fitness, health, sleep, and skills.  Work on yourself harder than you do on your business.

If you don’t like yourself, it’s not going to be easy to walk around liking anyone else, because there is no love to give away.

He liked people and it showed…

You can be a leader because you are the owner or because you have the tile – that’s one thing.

But being a leader who people will really give their best for is another.

If you really like people, listen to them, and care about what they are saying – that’s the kind of leader you want to be, and it’s something to aspire to and work on.

Sacrifice for your goals

I thought about what I have sacrificed in my years of trying to see who I can become by chasing big goals and taking risks.  Many times, while others were playing, I was working.  Many times while others were entertaining themselves (with TV, Facebook, etc.), I was reading or studying.  When others left all work-related cares behind as they walked out the door of their workplace at 5 pm, I was still carrying them as I walked out much later; and carried them all day and all night every day.

I guess you could call that sacrifice IF you valued leisure and entertainment more than you valued what I was doing.  But most often, I didn’t.

Were there times when I wish I could be playing while I was obeying my inner disciplinarian and getting my work done?  Sure.  But my progress towards my larger goals was a greater reward for me than short-term leisure.

For the most part, it reminds me of a discussion about observing a master doing what he was born to do – you can not tell when he is working and when he is playing.

It’s only sacrificing if you expect to live like everyone else – doing what they do on the schedule most keep.

Who do you have around you?

“The first method for estimating the intelligence of a ruler is to look at the men he has around him.” – Niccolo Machiavelli

Look around.  Who do you have around you?

To the line, not over it.

The leader needs to get the most from their team.  They need to get them to do things they would not have done had it not been for the leadership provided.

There is a line between pushing a team to greater productivity and breaking them. 

The leader needs to move the team towards the line of great productivity without crossing it.

How far away from the line is your team?

People think mostly about themselves

People think mostly about themselves.  Don’t you?

Most of the time you are thinking about your problems, your dreams, what you are going to eat, what you are going to do this weekend, your family, your home….your world revolves around you.

So what do you think your prospects and customers are thinking about?

Themselves!

When marketing to them, don’t just talk about you and your products, talk about them and their lives and their problems.  They will listen more when you talk about their favorite subject – their own life.

Take a look at your marketing.  Does it say “we do this, and we are great because of this and that?”

Or does it say “You’ll never have this problem again” and “you’ll feel great and be thrilled with this”?

Talk their language.