Abonar’s Blog

I was in Vancouver during the last weekend of the 2010 Winter Olympics. I have to say I was really impressed by the city’s organization, appearance, and performance quality. But most of all, I was impressed with how they handled themselves professionally and creatively to overcome shortcomings and criticism of the winter games.

Something that really stuck in my mind was how they handled the technical failure of the fourth pillar during the lighting of the Olympic torch. The cauldron was supposed to be lit by four pillars however only three pillars worked as planned leaving one of the torch bearers to stand awkwardly in position as the ceremony proceeded. A tremendous amount of time, effort and money went into planning the event and this malfunction was completely unexpected. Millions of viewers witnessed the event and critics were quick to jump on the mishap.

However, the organizers not only redeemed themselves during the closing ceremonies but they turned their failure into a success. They enacted a parody of the pillar mishap during an attempt to re-light the cauldron. They introduced a clown pretending to mock-repair the pillar with his hands. I was impressed how they used creativity to relive a bad moment and turn it into something positive. The result was a positive impact on viewers, volunteers, and organizers. Organizers of the event could easily have hidden the problem and didn’t have to “own up” to their mistake in front of millions of viewers, many of whom had forgotten the initial failure. But they chose this as an opportunity to laugh at themselves and didn’t view the mistake as something negative. Mistakes happen, things don’t always go as planned. The Olympic organizers embraced their shortcoming and turned it into something positive.

I think this is something that businesses can learn from. Organizations are continually faced with obstacles and failures as things don’t always go as planned. So here are five rules for handling these types of situations.

1. Be honest. The first thing you have to do is to face your problem truthfully. Don’t cover up your mistakes and don’t lose focus by coming up with excuses. Sh*t happens, deal with it honestly. At the end of the day, your objective is to better your business.
2. Be Creative. Sometimes you can better a situation by thinking outside the box. In the example above, organizers chose to take a risk with their comedic performance and it resulted in something even more memorable.
3. Learn from your mistakes. You can’t change what happened and sometimes you don’t get a second chance. But you can learn from your failures and use that experience and knowledge to help make future ventures a success. Talk to those involved and see what went wrong, what went right and what steps need to be taken in the future.
4. Think of your stakeholders. You have to realize that project shortcomings and failures impact your entire organization, not just you. Employees, volunteers, customers, investors and any other stakeholders involved are affected by your actions or inactions in different ways.
5. Be Prepared. Obstacles and failures are a normal part of business so it’s important to be prepared for undesirable events. Bad things happen, so be prepared.

The parody of the Olympic torch lighting was a simple action that, in my mind, had a significant impact on viewers and volunteers. This gesture symbolized confidence, honesty, integrity and modesty. It was a moment I was proud of. Congratulations to a successful 2010 Winter Games. Go Canada Go!

We have all heard the conventional wisdom that “the customer is always right” and “we exist to serve our customers,” but what if you have a customer that is so bad that his association with you damages your business? I say fire him.

This blog post came from the news report of a St. Andrews, N.B. Tim Hortons owner banning a patron for life. Meet Jimmy Craig. Craig, a paramedic, is apparently a decaf aficionado and had a few experiences of Tim Hortons coffee that tasted “burnt.” The report stated that he would repeatably complain about the coffee quality, and was described as becoming “increasingly aggressive” towards staff. The restaurant owner, Edwin Dow, banned Craig for life. Craig is trying to get the ban overturned and has hired a lawyer to do so. In the article, Craig says “I feel like the victim of a bully. “What kind of a businessman treats customers like that? It just baffles me.” Sorry Jimmy, but Edwin Dow made the right decision, and I suspect he is a very good businessman. Tim Hortons corporate agrees and stands behind his decision.

This was the right move because it is consistent with what makes a good business relationship – mutual benefit. Here, Tim Horton’s is giving up about $1.50 in revenue per day. In return for this, they are improving employee morale by standing behind them in a dispute. I am guessing that the atmosphere in the store will greatly improve as people customers will be spared the delay and awkwardness of the repeated complaints. Full marks to Tim Hortons!

What about the rest of us? What are the guidelines one should use in getting rid of your worst customers? Tim Ferris writes of his experience in The 4-Hour Workweek. He found that the bottom 5% of his customers caused 40% of his problems. When he severed relationships with these troublemakers, he had more time to devote to serving his top customers and getting more like them. So if your customer:

• Is extremely price-sensitive, constantly trying to reduce price and terms,
• Frequently misses payments or underpays,
• Uses complaints as a way to pressure you on price,
• Gets abusive to you or your employees,

its time to fire him! Think of the great gift you give to your competitors by inflicting him on them.

One more thing. Jimmy Craig, in addition to being a stupendous ass, broke one of my rules for personal health and happiness: DO NOT ANTAGONIZE THE PERSON HANDLING YOUR FOOD.

I’d love to hear of your customer horror stories and how you handled them.
Yours in blogging,
Sean

Networking is one of those things that doesn’t come easy or natural to everyone.  Who do you talk to? What do I say? How do I approach people? How long should it take? These are a few of many questions I hear about networking. A lot of individuals have told me how frustrating networking can be and have asked if there’s anything they can do to make the experience easier and more effective. Using my own experience with networking I’ll share a few things that have helped me over the years.

The most important thing about networking is to understand that it takes time. Don’t expect to “score” immediately. You have to think of networking as building a relationship. And a key to developing strong relationships is establishing trust. Put this into a business perspective. It takes years for businesses to establish a strong brand name and earn people’s trust. You’re essentially doing the same thing when you’re building a network. You have to earn someone’s trust and establish credibility for the product/service you’re offering before you can consistently “make a sale.” Until someone learns about me, trusts me and knows what I’m offering, I don’t expect any kind of help from them.

Consistency and frequency are important. You can’t develop a strong relationship with someone if you don’t have some kind of regular quality contact with the other party. I have found that networking is more successful when I join groups that meet on a weekly basis. Naturally, the more consistently and frequently I meet someone, the faster I can develop a rapport with that individual and get to know them better.

Don’t think of someone you meet as only a potential client but also a referral partner. If they don’t intend to use your product/service they may know someone who will. The best referral partners are those with whom you have relationships that are mutually beneficial. At the end of the day, they are looking for the same thing as you. Generally, the best way to get help is if you can return the favor. So try to learn about the other person, listen and ask questions. Try to understand what business they’re in and what they’re looking for. It’s a relationship remember. It’s not all about you and what you’re selling.

In my next post, I will discuss networking for your business in organized groups.

This post is the second in the banking series.

A financial institution’s policy of holding funds is often a source of customer complaints because the rules and reasons are often poorly understood.

New accounts of all kinds are usually subject to the institution’s hold funds policy unless you are a well established client. The bank will prevent access to most Canadian cheque deposits for at least 3 days and up to as much as 7 days. A teller obviously won’t put a hold on a cash deposit but he or she will put a hold on a deposit containing cheques. This means that if you deposit cheques with a teller or anything with an automated banking machine (ABM), you will not have access to the funds for a least 3 days. Cash deposited through an ABM will be held because the machine has no way of verifying that the envelope actually contains anything.

The bank does this to protect itself against fraud by new account holders. This allows cheques that have been deposited time to clear through the payment system. Any forged or fraudulent cheques that were deposited will usually charge back to the depositor’s account during the hold period and bank staff will be alerted to the activity.

Cheques drawn on foreign banks will have very long hold periods (U.S. cheques are held for about 30 days) because the payment clearing system between countries is often very slow. Foreign currency cheques drawn on Canadian banks will have longer hold periods as well, from 10 to 20 days.

Clients who have established a relationship with their financial institution may have their hold limits increased. For example, a long time client may have the first $5,000 of a deposit available to him but any deposit in excess of this amount will be held. This gives the client instant access to his funds but limits a potential fraud to $5,000.

Bouncing too many cheques or other suspicions activity will result in the bank putting a “hold all funds” back in place. This is one good reason among many to keep track of your account balance to make sure you have the funds available before writing a cheque.

This week I want to share a report on how we used the Theory of Constraints (TOC) to help a client rapidly turn around their operation. The details of the business have been changed to protect their privacy, but the rest of the story is true and has some great lessons for every business.

The Job
The client, a manufacturing firm, contacted us because they were having a cash flow problem. They found that over the years, the cost of raw materials and their products have doubled. This increased the amount of cash required in their cash flow cycle. They were also looking for a business plan to expand their operation.

The Situation
Clients rarely have a cash flow problem in isolation. This was no exception. Although their sales have increased by an impressive amount, their net profit didn’t increase. In fact, it went down and was often negative. The client had funded these losses through debt but was now at the point where the banks were not willing to fund them any further. In fact, if the client didn’t turn things around, the bank’s credit department would get involved. They were also in a position where bank financing for the plant expansion was very unlikely, and would require an equity partner to happen.
The client was also experiencing other problems typical of a manufacturing firm. Employee turnover, customer complaints over delivery and rail car and shipping container supply headed up these problems. The client’s managers were having trouble seeing the root cause of their problems due to the chaotic nature of their operation. They were tired of constantly struggling to keep enough cash to keep current on all their commitments.

Analysis
We used TOC on this project. After gathering information on the problem, the first step was to determine the goal of the firm. This was pretty easy: to make money now and in the future. The second step was to determine the constraint, or what was keeping them from making more money. The managers knew right away: the lack of rail cars and shipping containers. In fact, the manufacturing plant had over double the capacity of what they had shipped the previous year. So we knew that the way to improvement was through increasing shipping. We also knew that solving the rail equipment problem would go a long way to solve all of the other problems listed. The employees would be retained based on a bonus payment calculated through increased profits. By protecting the rail transportation constraint, customers would get more reliable delivery. By demonstrating to rail roads and equipment suppliers that they will quickly load and ship their equipment, they would be able to get a larger, more reliable supply of equipment. In fact, when a manager talked to the railroad, they told him that they were restricting supply to them because the client wasn’t filling the cars quickly enough. After seeing how the client was focussed on quick turnaround, the railroad agreed to increase car supply.

Results
So far, the results have been fantastic. When we first did an analysis of the firm, we thought that a good goal this year would be to hit the 50th percentile in profitability. After 5 months of operation, they are on track to shatter this goal. In fact, they are on track to beat their profit goals by over 5 times! This will put them squarely in the top quartile of their industry, without any capital investment. In fact, this increased capacity eliminated the need for the expansion.
This change is not easy. The management have the challenge of selling this extra capacity and hiring the extra staff required to meet this extra production. The maintenance bill of the plant has increased because of the extra production. These challenges are well worth it as they are aligned with their goal.

Lessons
The managers of this client were working extremely hard to keep afloat before we started working with them. Their effort was being spent managing cash flow, scheduling production, trying to hire new employees and keeping customers relatively satisfied. Now they can solve all of these issues through protecting and elevating their constraint.
Although I have a background in manufacturing, none of the Abonar team had any experience in our client’s business. This didn’t stop us from helping our client turn their plant into a great moneymaking machine. This means that if you are looking for help in improving your business, don’t limit your search for people with extensive experience in your industry. Major breakthroughs come from unconventional thinking.

I left out the full methodology of TOC in this blog. For more information on this, click here.

So what’s the deal with business plans? Do they serve a real purpose or is it simply a document people need to fulfill loan requirements. The reason I’m asking is that it’s a question that’s often asked or implied when the topic of business plans comes up. Is a business plan really useful?

Well, for starters, a good business plan should serve as a blueprint for every aspect of your business. It should guide you with your business and help you establish targets, goals and objectives that otherwise might not be thought out carefully. Business plans reduce the time spent making decisions. How many employees do you need on certain days? Who is responsible for equipment maintenance? How much cash-flow do you need on hand to keep the business running? What margins are required for you to make money? These are the types of things that you need to be prepared for so you can knowledgably make decisions for your business. Business plans should help improve communication between all members of the business by creating a sense of common purpose for the people involved. It should get everyone thinking about strategy, thinking outside the box and thinking inside the box. Basically, it’s to get everyone thinking about all key components of the business.

A business plan should involve both the business owner and the party responsible for developing the business plan. I don’t think people realize how important the process of developing a business plan is. The best business plans are developed with the full involvement of the business owner.  A good developer poses questions and guides the business owner to make decisions on their own. We’ve had clients thank us for posing questions that led them to build solutions through brainstorming and team exercises.  Clients have mentioned that the process of building the business plan is as important as the final document itself. Think of what’s involved in building a house. Overall, most people know what a house looks like and what its built of. But you wouldn’t go out and build a house without the aid of an architect and blueprints. So why would you invest hundreds of thousands of dollars in a business without first putting the time and effort into a business plan?

At the end of the day, a business plan won’t be the reason for your success or failure. It cannot guarantee success and its not going to increase your bottom line. Its meant to help you make decisions, be prepared for barriers and risks involved, and to get you thinking strategically about the details of your business. A good business plan will show investors that you’ve spent the time and effort in developing something you believe in. Its something that you can look back to and use during the lifetime of your business. A good business plan is something you will update and change over time so it will always remain useful for your business. A business plan is the first investment in your business, and it should be a good one.

Bank products and policies are generally poorly understood. Bank employees have a heavy workload and they often don’t take the time to fully explain things. Business people are afraid to ask questions because it will reveal what they don’t know. This leads to frustration for everyone. This series on banking will help to alleviate this frustration.

Business accounts basically come in three flavours; operating accounts, savings accounts and U.S. dollar accounts. There are many variations of these three types as banks and credit unions add features to try to gain competitive advantage but ultimately beneath the window dressing, it’s just these three basic accounts.

Operating accounts are for the day to day activities of the businesses. Business owners can write cheques on these accounts or use a debit card to make purchases, much like a personal bank account. Business accounts are quite different though when it comes to fees charged to the account holder.

These accounts will have often have a flat month fee plus fees for each transaction. Business accounts are charged for deposits based on the content of the deposit. For example, one bank is charging $1.80 for every $1,000 in paper cash deposited and $1.80 for every $100 in coins deposited. There is also an approximately $0.16 fee for each cheque contained in a deposit. Cheques & deposit books are more expensive than those for personal accounts. Night deposit will cost extra as will the disposable plastic bags for the drop. Some institutions may offer a bundled price monthly price for a certain level of transactions.

Business savings accounts generally don’t have chequing privileges but most institutions allow a couple of free transfers to an operating account each month. The rate of interest paid on these accounts is usually tiered so that larger balances earn more interest. For example, it might take a $100,000 balance to earn 1%. As a rule, these accounts aren’t worthwhile and surplus cash should be used to buy short term investments instead.

Foreign currency accounts are available from most institutions. The most common is the U.S. dollar account because of the large number of Canadian companies that export down south. These accounts work much like operating accounts but the fee structure might be slightly higher. Financial institutions will take a commission whenever one currency is changed to another. This means that the exchange rate you see on the news won’t be the rate you will be getting at the bank. The commission varies according to the amount of money being exchanged. A transfer between an U.S. dollar account and an normal operating account will trigger these commissions.

The next post in this series will deal with the rules governing these accounts.

This week I attended the SEIMA Business Expo and Linkages in Saskatoon. SEIMA is an industry association for Saskatchewan environmental professionals, and runs events like these to support Saskatchewan environmental businesses. The presenters offered a wide variety of topics covering all parts of the environment. There was a mix of technical presentations, partnership pitches, financial how-to’s and government program education.
As I think of the show, I am left with a couple of impressions:
I believe that water will follow energy’s path in world importance. Before the recent run-up in energy prices, people used energy like it was cheap and endless. We saw the problems that this caused, including climate change. Now that people are treating energy like a valuable resource, we can look back and see how wasteful we were in the past. Although we are nowhere near sustainable, we now acknowledge the cost of energy. Water is the same. We currently expect limitless clean water for free or very cheap. With this mindset, we are quickly depleting our water supply. There are several areas in the world that are already suffering from the lack of water. Eventually the law of supply and demand will increase the price of clean water. How we deal with this will have a profound effect on the future of humans on this planet.
Whenever I go to these conferences, I’m impressed with the quality of Saskatchewan innovation. Maybe it’s due to our farming background, but the innovations always seem to be very practical and cost efficient. There were several examples of this on display, like a couple of ways to eliminate the high cost of providing water and treating sewage. There were also a number of solutions to the high expense of site cleanup through cutting edge testing techniques. These presentations lacked the flash and glitz you see elsewhere, but more than made up for it in substance.
Congratulations to SEIMA for putting on a high quality conference. To find out more about SEIMA, here’s the link.

Welcome to Abonar’s blog. We wanted a better way to connect with the business people and budding entrepreneurs out there so we decided to create this blog. The content will be aimed at that audience but we imagine it will continue to evolve as the blog finds its voice.

We encourage your comments below and we will do our best to answer all questions, either in the blog or privately, as you may prefer.