Archive for March, 2010


Management Strategies, Sales Strategies, Sales With Purpose No Comments »

Vol. LX

Dear Manager,

Manufacturers in all industries take physical warehouse inventories on a periodic basis. This is done for many reasons, including determining its value, correcting inconsistencies, and weeding out obsolete inventory. It’s a no brainier; physical inventories are a direct reflection of a company’s health and vitality.

What determines which of these “hard assets” should be considered obsolete? It comes with the conclusion that what was previously an asset no longer sustains its value. There are clear and obvious fixed costs in retaining resources that no longer represent future revenue. Warehousing, financial carrying costs, data entry, and poor use of valuable management time in their maintenance, are just a few. The closer we look, the more apparent it becomes. When an asset is no longer an asset, it is time to cut our losses and move on. When was the last time you took an inventory of all your assets?

In this instance, I am no longer referring to the hard assets in your warehouses. What is the current financial inventory of those assets your business considers to be its good will, or “soft assets?” These include current manufacturers relationships, customers, sales territories, and staff positions within your organization. Certainly there is a constant ebb and flow in each of their evaluations. While the need to take a close look at the value of ones physical inventory may be obvious, it can be much less obvious to do the same for other organizational assets. Rarely have I seen an organization define a specific and detailed financial evaluation for this equation and each of its parts.

Begin by taking a full accounting of exactly where your revenue is generated in all aspects of your business. We often have a very general idea, yet it’s not uncommon to be well off the mark. We all know the rule of thumb that twenty percent of our assets sustain eighty percent of our revenue. I have always found this concept to be much closer to actuality than I ever anticipated.

If this is the foundation, then the bottom twenty to forty percent of your assets represent less than ten percent of your revenue. If this were true, would it not be considered obsolete inventory if professionally reviewed in any other light, or by any other form of measurement? Similar to an inventory of ones hard assets, what is the true cost of retaining underperforming and value-deprived soft assets?

For many years, I made a concerted effort to minimize the number of client manufacturers our organization represented. Our top five manufacturers represented seventy percent of our sales, with the remaining ten to twelve representing the remaining thirty percent. To take it one step further, the bottom five manufacturers represented less than five percent of our total revenue. As often as I would analyze this, adjusting the mix with the addition and subtraction of manufacturers, the bottom five manufacturers would continue to maintain a very similar percentage.

There were always other considerations in retaining some manufacturers, regardless of their current revenue. A manufacturer’s future growth potential, their significance to other areas of our presentation, or simply a foot in the door of a potentially lucrative category, all came into play. These “other considerations” should also be evaluated as part of your total inventory. I believe you will find that in all but the most rare circumstances, their net value is a few hairs above meaningless, while their carrying costs continue to be very significant. (By the way, ones ego can’t be concluded as an aspect of “other considerations.”)

My own rule of thumb always came down to the following: If, as an organization, we could double or triple the sales of one of these underperforming product categories, would they then represent any value? In almost all cases the answer was no, and the chances of actually increasing their sales by this multiple were slim to none.

We once represented a manufacturer who produced a variety of products from varied artists. They were convinced that one of their artists was being “under represented” by their national sales force. The truth was that this artist represented only one percent of their national sales, yet we were asked, and expected, to promote these products to new markets outside our current customer base. When I asked this manufacturer what percentage of their total sales this artist should represent, the response was an unequivocal, “You could double the volume!” I could hardly wait to redirect the field sales force for this dramatic potential!?!

I asked this manufacturer if they had considered the corresponding impact of this focus on the much more successful ninety-nine percent of their presentation. “If sales forces across the nation were directed to double the sales in this ultra limited category of the product mix, could your company accept reduced sales in other areas, especially your best sellers?” In fact, this was not an unusual conversation over the years.

There seems to be a tendency for all of us to minimize our risk by telling ourselves we are better protected and more secure by investing valuable resources in areas with little or no potential relating to investment. Meanwhile, time, energy and, at some level, our reputation, are being squandered on what should be considered “obsolete inventory.”

In this time of both unprecedented institutional and personal investment in the stock market and mutual funds, would we consider a similar strategy with our personal investments? Would we continue to accept losses even though our investment broker was also our best friend? These same considerations should be used with regards to the continued profitability of some of our customers. How often do we hold onto a customer due to prior profitability, personal relationships, or simply out of habit, regardless of their current value to the whole?

Once again, the top customers will represent eighty percent of our revenue and probably receive, due to limited schedules, less than fifty percent of our efforts. A similar inventory can be conducted for customers by assigning a value based on the investment required to maintain them. How often are “obsolete customers” retained at the expense of developing a much more profitable customer next door? How often is time invested with a languishing customer at the expense of a new and very profitable presentation to one of our top ten clients? There are only a limited number of productive hours in the day; every decision relating to time is at the expense of a better use of our efforts!

For six years, I toiled over the development of a new division within our company, spending significant time trying to develop this category. Trade shows, the hiring process, problem solving, and hundreds of hours of staff time were invested in this endeavor. After six year’s effort, the division’s gross revenue represented less than ten percent of the whole. The division was ultimately dissolved, and the weight of the world seemed to pass in its wake. That same year, our company went on to have its largest growth year of the previous ten. The focus was back where it belonged.

There are similar situations where sales organizations try to expand into new sales regions. If, after a reasonable period of time, profitability has not been achieved, move on…quickly! You are certainly not doing the staff members in these regions any favors by subsidizing their income or sugarcoating the job’s inherent lack of potential. What we are doing is jeopardizing the balance of our staff, and their livelihood, by reducing the profitability of the whole!

Business will need to be much more streamlined than in the past. Have you ever noticed how much easier it is to increase sales at the top end of your presentation than it is at the bottom? This is certainly a very obvious statement. Equally obvious is our ability to resolve to focus a much greater investment in these areas by reducing “obsolete inventory.” Don’t the investments that we would consider to be our most valuable deserve more?
Poorly producing “assets” are historically the most time consuming aspects of our business. Could it be possible? Is eighty percent of our productivity invested in “assets” representing only twenty percent of our revenue? Sell the farm, Martha, the barn door was left open…

Personal Regards,


INTERPERSONAL© is published by INTERPERSONALBIZ.COM, Keenan Longcor, Editor, ©2010. Duplication of this publication is permitted for both personal and business use. Excerpts may only be quoted with acknowledgment of INTERPERSONAL/INTERPERSONALBIZ.ORG as the source. For re-publication rights, please contact the editor at KEENAN@INTERPERSONALBIZ.COM


Management Rewards, Management Strategies No Comments »

Vol. LIX

Dear Manager,

It has now been many years since I took the first steps in the process of selling my business. Certainly, there has been enough time to reflect on its implications, and the personal changes I still consider to be “in progress.”

In my case, I would consider that both the timing and the conclusion of the sale could not have been any more fortuitous. I sincerely believe that all parties have gained in the end result. I also fully understand that this is not always the case. It takes an extraordinary amount of resolve and commitment to create a successful, productive, and seamless transition.


Hands down, this is the question most asked of me by fellow managers and owners of companies. This is a very individual question that has many factors with varied priorities for all parties. No one can consider this decision for anyone but himself or herself. All too often after selling a business or retiring, many find themselves wanting right back in it. When do you know for sure? I believe that if an important decision is unclear, it is often because you need more information in order to proceed. Wait until it is obvious. I have developed a list of factors that assisted in my own final and successful conclusion. I consider each factor equal, yet some become more equal than others depending on our own sense of priorities and the time frame in our life.

Financial considerations are certainly one of the keys to this decision. While security provides its own set of freedoms, it will be low on some individuals’ lists of reasons for personal transition. Financial freedom never brings happiness. It does provide flexibility, a window of opportunity, and a certain amount of peace of mind. Everyone has a different perception regarding when “they have arrived” financially. Some will never arrive, because as they become closer, uncertainty raises the bar one more notch. As professionals, there will always be new opportunities to produce income. Suffice it to say that this is only one of the considerations. I would strongly suggest it not be the only deciding factor.

Fitness should be one of the considerations in this decision. Getting older certainly presents its own set of challenges. For those whose health is not what it should be, I can think of no better reason to look for higher priorities in your day-to-day life. There is nothing sadder than an individual who works all their life, yet never realizes the opportunity to enjoy their accomplishments. I have an acquaintance who, along with his wife, spent many years working to built a successful business. It was not until his wife’s life threatening illness and painful recovery that they decided to sell the business. This kind of life experience can establish our priorities very quickly. They have now retired at a relatively young age, and are enjoying each day.

Another perspective comes in the form of emotional fitness. There is a time when we, as managers, simply need to move on to new pastures (this is not to be confused with “out to pasture!”). It is not that we no longer enjoy what we do, it is that we become too predictable both personally, and from an organizational point of view. There comes a time in every organization for a fresh spirit and new foundation of ideas. We often see this in the head coaching ranks of college and professional teams. Very high quality individuals move from team to team, often fired from one position only to be hired immediately by another top team. The team’s success often follows. There can be value in change for changes’ sake.

Fulfillment played a role in my own decision to make a change. I found there was no longer the degree of challenge and opportunity for personal growth that I knew I needed to go forward. I had mastered much of the day-to-day operations many years earlier. There never seemed to be enough time for training, pure marketing and writing, the areas I most enjoyed. Over time, it became more and more apparent that I needed to expand on these areas, as they were the areas that brought me the greatest satisfaction and sense of fulfillment.

There also comes a time for many managers when they simply no longer desire the responsibility of running an organization. I believe in our twenties and thirties we are striving to prove ourselves. In our forties and fifties, there is very little left to prove. Some of the rewards become less fulfilling than at an earlier time in our careers. It can be time to once again experience the butterflies we felt when the future was a bit more unsettled, when the victories were only ours, and the decisions only affected us personally.

Future implications are, of course, a very important and often underrated factor for anyone deciding to make a change. My wife was convinced early on in the selling process that I would find myself at loose ends once the sale was complete. While nothing was certain, I had confidence that the wanderlust of new challenges and unfulfilled opportunities would keep me occupied. My current schedule is as satisfying and busy as I choose to keep it.

For others, the challenge is much greater. A good friend recently retired after many years of public service. Within months he was climbing the walls. He asked me, “Are you sure you’re prepared for this time of crisis in your life?” His anxiety encouraged me to develop a more formal set of strategies for the future. I must admit they will take me years to accomplish, and at a slower pace than in the past.

What new and un-thought of opportunities might present themselves if given the chance to be nurtured for the first time? This is the most exciting part of the transition in many respects. Everything is new; it just doesn’t get any more exciting!

I believe these topics provide a good foundation for defining your current and future plans relating to your career. I also believe for many considering change, these areas of review will only strengthen and reinforce their current commitment to their career. It can always look like “greener grass” when others are enjoying the time of their life in their current situation. Don’t take it for granted that the next situation will provide everything on your current “wish list.”

The second area of importance in ones decision to sell their company, or move to a new situation, is in ones commitment to protecting the fiber of the current organization. Its best interests, and the integrity of what you as a manager and your team have accomplished, is your collective heritage. Over the past couple of years I have observed two instances where this was horribly botched through no fault of the purchasing companies. To this day, I am totally bewildered by the lack of integrity and common decency exhibited by the sellers.

In the first situation, a company owner actually vacated the premises the day after the closing was completed! The new owners were completely caught off guard, there was no transition management in place, and their business became a “free for all” – it was total chaos from day one. Employees left, clients lost faith in the new owner, and it took months to right the ship. It may take years for this company to regain its former momentum.

In another instance, the seller agreed to retain their current role as president of the organization for a specified period of time. At a future time, the seller planned to devote increased time and attention to a second business that they also owned. The problem became apparent very early on. Instead of maintaining the role of an active president, the seller effectively “checked out” as soon as the sale was complete. Over a period of months, the vitality, the steady hand, the sense of direction, simply continued to bleed from the organization. When the need was at its greatest, this individual’s spirit was nowhere to be found.

How is it possible that these individuals could show such a lack of respect and integrity for what had been their life’s work for many years? As these individuals reflect back in the years to come, what will be the final chapter of their story? Staff members who assisted in their prior success might have some interesting passages to share!

There can certainly be many rewards in starting over. I am only in; there are no guarantees. I have, in fact, validated one business principal over the past few years. While we may like to convince ourselves of our indispensability, a perception that only seems to grow over a period of years, this belief is as flawed and invalid as we were always afraid it might be. On the other hand, with resolve and some good fortune, there just might be more opportunities out there than we ever dreamed possible … only when the time is right.

Personal Regards,


INTERPERSONAL© is published by INTERPERSONALBIZ.COM, Keenan Longcor, Editor, ©2010. Duplication of this publication is permitted for both personal and business use. Excerpts may only be quoted with acknowledgment of INTERPERSONAL/INTERPERSONALBIZ.ORG as the source. For re-publication rights, please contact the editor at KEENAN@INTERPERSONALBIZ.COM