Archive for Business and Finance
Using Personal Savings as Startup Capital
Posted by: | CommentsThe habit of saving money is important for the person who wants to start a business and succeed. When Gary Blinn served two tours of duty with the U.S. Navy in Vietnam during the 1960s, he saved 95 percent of his military pay. About all he spent was a dollar a week on cigarettes. The Navy paid for all meals, and he had few places to spend money on the Mekong River, so Gary put his pay into government savings accounts earning 10 percent interest. “The government encouraged saving,” he says, dryly.
When Gary got out of the military, he used his savings to help finance his masters of business administration studies at Harvard University. Upon graduation, Gary went to work for the international banking division of the First National Bank of Chicago. He worked for ten years in Panama, Guatemala, Brazil, and Hong Kong, among other overseas assignments. During that time he and his wife saved half of his pay.
“My wife and I were both poor kids, so we learned to save,” Gary says, adding that his employer would help with overseas expenses. “The bank would try to make up any differential in costs of living, such as the higher cost of air-conditioning in Saudi Arabia, so that employees would accept foreign assignments. They would compute what an apartment would cost in Chicago. Employees would pay that [amount], and the bank would pick up any additional cost of housing.”
Gary didn’t even own a car until he was 38.
His longtime habit of thrift gave him a large nest egg with which to buy Norfolk Beverage Co., a Budweiser distributor in Norfolk, Nebraska, when he left the bank and returned to the United States in 1982.
“Four years at Annapolis [U.S. Naval Academy] and eight years of active duty in the Navy taught me what I need versus what I want,” Gary says. “When you have wonderful friends and good medical coverage, you don’t need a great deal more.”
It became easy for Gary not to spend every dime he made because he had cultivated an attitude of satisfaction with whatever he had. Equally important was to develop the habit of saving money at an early age and to stick with it consistently. By putting the money into savings accounts up front, it isn’t missed as much as if it is the last payment made at the end of the month. For Gary, saving became second nature.
His discipline of saving is a model for all would-be business owners because virtually all of them must rely on savings, not just to buy or start a business, but to live on until the venture can afford to pay the owner a salary. Also, throughout the life of the business, the owner needs the discipline to save money for taxes, for unanticipated expenses such as broken equipment or accidents, and for growth opportunities. Gary and his wife continued their saving ways even as Norfolk Beverage Co. prospered.
“We paid cash for our house; our vacations are not expensive,” Gary says. “I wanted to be an archeologist, so I like to go on digs to Roman forts in England, eat beans out of can. That’s a lot more fun than fancy hotels.”
Teams – What and Where?
Posted by: | CommentsTeams are becoming more and more popular. One recent survey reported that over half the people working
in medium-sized organizations were involved, in some way, in what was called a team. Despite the fact
that some of these teams aren’t really teams this does, nevertheless, tell you that teams are becoming
increasingly popular. Most of the time this happens because somebody senior in the organization thinks
that if you all switch over to teamworking then you will be more flexible and responsive. Being like
this, it is argued, will lead to greater efficiency and cost savings. They might even go so far as to
claim that being in a team will improve productivity, safety, absenteeism and work quality.
Unfortunately, this isn’t always so. One of the reasons for this is that a lot of these so-called
teams are really false or make-believe teams. Another is that working in these teams can lead to
increased stress as a result of higher or different work demands or unclear work roles – all of which
reduce productivity.
But teams can work – and do that well. Finding out why this does – and doesn’t – happen is the next
vital step on the road to achieving success with your team. To take that step you will look at the
what and where of teams and teamworking and the reasons why some teams result in people working
flexibly and responsively and others don’t. When you have done that you will be clearer about the link
between teamworking and effectiveness, more able to answer questions such as:
- what sort of task should you ask your team to do?
- what sort of setting will help your team to carry out that task effectively?
Project Management Tips – Committing Resources
Posted by: | CommentsBefore starting to implement a project, you must study resource requirements and budgets. The feasibility of the project depends on you and your team being able to justify the expenditure by comparing it favourably with the proposed benefits.
Estimating Manpower
Think about who needs to be involved in each activity and for how long in actual worker days. A team member may need to work on a project for a period of 10 days, but if he or she has to work on it for only 30 minutes per day, the total commitment is just five hours. If the member can usefully work on other projects for the rest of the time, the cost to your project will be a fraction of the member’s 10-day earnings or charge. But if he or she can make no contribution elsewhere, then your project’s budget must bear the full cost.
Identifying Other Resources
While the major cost of a project is generally the people, there are other resources that will have an impact on the budget. For example, you may have to commission market research. Facilities, equipment, and materials may also involve expenditure. Failure to identify all the costs will mean that you lose credibility when others examine the project to balance its costs against its benefits. A comprehensive estimate of costs at this stage also reduces the risk that you will have to request extra funds once the project is up and running.
Questions to Ask Yourself
- Can I estimate costs or resources more accurately by asking someone with relevant expertise for advice?
- Is there another way to achieve the goals that would not require expenditure on particular resources?
- Is the cost estimate that I have drawn up realistic rather than optimistic?
Examining the Details
It is not enough to know that the team will need a training room for a month during the project, you will also need to know how large that room needs to be and what kind of equipment you should install in it. The better the detail at this stage, the more likely you are to avoid problems during the implementation. This will enable your team to focus on achieving objectives rather than on fixing matters that were poorly planned.
Choosing a Costing Method
Whatever resources you consider, you can calculate their cost in one of two ways: absolute costing or marginal costing. Absolute costing means calculating the exact cost of the resource. If, for example, a new computer is essential for the project, the amount you pay for it becomes a project cost. If you can use an existing computer, allocate a proportion of its cost to the project. Marginal costing means that you only allocate costs to the project if they would not be incurred if the project did not take place. For example, if an existing computer, which is not being used, is required, the marginal, or extra cost, of the computer is nil. The cost of the computer should not be in the project budget. With practice, marginal costing is easy to calculate and is generally a more accurate measure of the cost of a project to an organization.
Making Compromises
In an ideal world, you would gain approval for all the resources you need. In reality, you will probably have to cope with less. The person you most want for a certain task may be unavailable, or the best premises for the project occupied, and you will have to make compromises. Look for compromises that will not threaten the overall aims and objectives of the project. For example, you may be able to recruit a highly skilled worker part-time and allocate the remainder of the work to a less experienced, yet able, team member.
Documenting Resources
The key to ensuring that the resources you require will be available when you need them is to produce a document that all the stakeholders can agree to. This is known as a commitment matrix, because it can be used to remind people of their commitments. Check that the matrix is complete and that every group of activities is comprehensive so that you can be sure that you have identified all the necessary resources.
Using Outside Resources
While many resources will come from within your team or organization, you will need to go outside for others. Make sure that you get competitive quotes from potential suppliers and reach an agreement on costs and performance that makes it easy for both parties to monitor progress tightly. You may need to brush up on your negotiating skills beforehand to ensure that you can win the best deal. While it may seem unnecessary to go into such detail at the outset, the tighter the agreement, the more likely you are to avoid conflict.
Getting Sign-off
Before you can obtain the official go-ahead for a new project, it must be proven that it is still a business priority and that its benefits to the organization considerably outweigh its costs. This is known as investment appraisal, or cost-benefit analysis, and it is a discipline used widely in many organizations which often have formal systems for the process. If the costs are the same or more than the benefits, the sponsors have three alternatives: they can proceed with the project regardless (although this is seldom desirable unless the strategic value of the project is very important to the long-term aims of the organization); they can modify the objectives and change the activities in a way that reduces costs; or they can cancel the project because it is considered unfeasible.
Points to Remember
- If your organization has an official system for obtaining sign-off for a project, this should be followed.
- Finance departments can provide useful feedback on your estimates by comparing your project’s costs with others.
- The benefits of a project should never be exaggerated – promises will be expected to be delivered.
Simple Steps to Determine Project Feasibility
Posted by: | CommentsBefore starting on a project, you need to be certain that there is a good chance it will be successful. Jake the relevant steps to find out whether a project is appropriately timed, feasible, and worthwhile before going ahead with it.
Timing It Right
However promising and desirable a project may seem, always carefully examine whether it is the right time to initiate it. Take into account other projects that have already started. Some organizations have so many projects in place that it is not possible for them all to succeed, so you may have to consider postponing the new project or curtailing those that are unlikely to produce valuable results. Since all projects require access to limited or even scarce resources, it is vital that each has a clear reason for existing and that now is definitely the right time for it to happen.
Identifying Driving Resources
Every project is driven by the needs of the organization. The stronger these driving forces, the more likely the project is to succeed. If, for example, a project involves winning back lost customers, the driving force is very strong. To create a list of driving forces, or reasons why your project should go ahead, decide which business concerns the project will have an impact on, and then compare your project with other projects. For example, if there is a driving force behind two projects to increase sales, then the one that, say, doubles sales is more likely to succeed.
Questions to Ask Yourself
- Are there any ongoing projects with a higher priority than my own that are taking up key resources?
- Are my project goals in line with the long-term objectives of my organization?
- How will the outcome of the project affect the performance of the organization?
- Could this project damage the chances of another project being successful?
Identifying Resisting Forces
There are always reasons why projects may not be completed. Such forces include people’s resistance to change, the weight of the current workload, lack of information or resources, or a dearth of people with the necessary skills. Identify these resisting forces early on so that you can overcome them, or change the timing of the project. A strong resisting force emerges in organizations that frequently initiate projects to change the way people carry out their jobs but fail to see the projects through. If people view a project as simply another management initiative, it will take great skill to motivate them to make it happen.
Seeking expert advice
Ask a key team member with technical expertise to help you identify reasons why your project may not be successful. They may be able to pinpoint flaws that you had not previously considered.
Predicting Success
A useful technique, known as forcefield analysis, will help you to decide whether the driving forces outweigh the resisting forces, and, consequently, whether the project has a good chance of success. By creating such an analysis, you will be able to see at a glance whether the balance is weighted toward success or failure. To assess the relative impact of each force, remember that drivers range from “one,” a weak driver, to “five,” an essential need. “Minus one” describes a resisting force that is not much of a threat to the success of the project, while “minus five” shows a force that is very strong, and that, unless you can minimize its impact, is likely to hinder you in achieving Strong the desired project results.
Tips for Project Managers – Leading Effectively
Posted by: | CommentsThere are many different styles oj leadership, hut because projects rely on good teamwork, it is important to favor a consensus-building, rather than a dictatorial, approach. Jo lead a project well, you must be able to motivate your team.
Understanding Styles
There is a spectrum of possibilities in leadership styles, and you will need to adopt them all at certain points in the project. While your approach may need to vary from a dictatorial style to a consensus-seeking one, the predominant style you adopt should depend on your organization, the nature of the project, the characteristics of the team, and your own personality.
Cultural Differences
Project managers in the UK often create an inner circle of key team members to speed up decision-making, while in the US, the entire team is brought together frequently. In Japan, decisions are reached by consensus, in which unanimous agreement is reached through a laborious process.
Changing Styles
Be prepared to change your leadership style to suit the circumstances and the team, even if you feel uncomfortable for a while because the style you are adopting does not come naturally. For example, some managers find consultation annoying and time-wasting, while other managers are so intent on gaining consensus that decisions take too long, and the project suffers as a result. The key to making good consensus decisions is to listen carefully to everyone before indicating which way they are leaning. A decision is then reached accordingly, unless someone can argue most convincingly that it is the wrong move.
Leading Appropriately
Each member of a team has a unique personality and style. Take time to study each individual and understand what motivates them so that you can provide the level of guidance they need. Some team members will prefer to be set objectives, with the project manager delegating responsibility to them for how they should be tackled. Others will react better to being given specific tasks. Use the appropriate style for each individual.
Obtaining Results
There are two major factors to consider when deciding which style of leadership to use. If the project is under time pressure, there may be no alternative to the dictatorial style because you do not have the luxury of time to consult. If you want to gain commitment, you must involve others in the key decisions to increase their willingness to make the decision work. Whichever style you choose, the quality of the decision is vital. Before you impose a decision, ensure that you have all the facts to prove that it is the right thing to do.
Points to Remember
- The team should not be expected to do everything your way, provided that their results are satisfactory.
- When a small point is important to a member of the team, it is wise to yield – you should be trying to win the war, not every single battle.
- If, in your view, the success of the project is in any way threatened, that is the time to be assertive.
Resolving Conflict
Personality clashes are inevitable when many people work together. There may be differences of opinion or disputes that arise from people having different standards on quality of work, or there may be one or two team members who simply do not get along. If team members disagree, find a way of resolving the conflict either by taking on the role of decision- maker yourself or by using diplomacy in talking to the people concerned. Conflicts can sometimes arise as a result of schedules. For example, one team member might want more time for a group of activities, which a colleague feels is unnecessary. Work through the schedule with both parties to arrive fl at a solution that suits everyone.
Standing Back
It can be a hard lesson to learn that a good leader will allow people to make a mistake. You may, from your experience, know that the team is taking a decision that is not in the best interests of the project. But if you take control, you are not necessarily helping them to improve. If they never see the effects of their decisions, they will never learn which ones led to difficulties. Obviously, you must use your discretion as to when to step back. The team’s development is important, but not as vital as achieving the objectives of the project.
Exercising Leadership Skills
To lead your team effectively, you must:
- Ensure that everyone is working toward agreed, shared objectives;
- Criticize constructively, and praise good work as well as find fault;
- Monitor team members’ activities continuously by obtaining effective feedback, such as regular reports;
- Constantly encourage and organize the generation of new ideas within the team, using techniques such as brainstorming;
- Always insist on the highest standards of execution from team members;
- Develop the individual and collective skills of the team, and seek to strengthen them by training and recruitment.
Choosing the Most Effective Method of Communication for Your Audience
Posted by: | CommentsOnce you know something about the individuals who make up your audience, begin to think about how to approach them. You’ll need a strategy to help devise the right message and to choose the most effective method of communication for your audience.
Hitting the right knowledge level
A thorough knowledge of what your audience already knows about your speaking subject is useful in a number of ways. First, it tells you where to begin. Don’t speak down to the audience by explaining fundamentals they already understand. Second, don’t start above their heads. Begin at a point they are comfortable with and move on from there.
Managing emotions
Even more important than what the audience knows about your subject is how they feel about it. What they know about taxation is far less relevant than how they feel about it when they listen to a talk about tax reform. You need to tailor your words carefully to what the emotional response of your audience is likely to be. The greater the degree of ego involvement (or emotional response) to a given topic, the narrower the range of acceptable positions open to you. In other words, people are much more open-minded on topics they are indifferent about than they are on topics they care about passionately. If you misjudge an emotional response, your communication will fail.
Establishing the audience’s role
Your message may need to reach only the audience before you, or you may be relying on those people to pass on the message to others. Think about everyone who might see or hear your message, including:
- Primary audience: These are the people who will receive your written or spoken message directly. Make sure that you understand and address their needs, interests, and concerns.
- Secondary audience: Others might read or hear of your message indirectly. Could the communication be given to a reporter, union organizer, or competitor?
- Gatekeepers: These are the individuals who you have to route your message through, and who might filter or block it. Does someone in particular stand between you and the audience you hope to reach?
- Opinion leaders: These are individuals who have significant influence over members of the audience. Who do they admire or listen to on this subject?
- Key decision-makers: These are people with the power to influence the outcome of the communication.
How Effective Delegation Works in the Workplace
Posted by: | CommentsDelegating tasks is not only a way to reduce your workload, it can also motivate employees. However, while having a task delegated to you can be a highly motivating experience, it can also result in loss of confidence and demotivation if you are unable to complete the tasks.
Knowing when to delegate
While delegation reduces your workload, it also means letting go of the task and giving it to someone else. This means you should only delegate tasks with a clear structure. Implement a monitoring process so that you can assure yourself that progress is being made and the person is comfortable with the task in hand. Delegate when the task is likely to be repeated, making it worth the time and effort, or when the task itself may be motivating for someone else to do. Avoid delegating if there are time constraints or the individual does not have the skill or experience.
Deciding how to delegate
How to delegate will depend on the working environment, how well you know the person you are delegating to, their level of experience, and the importance of the task. Delegation takes time to do well. With an experienced team, it can be done over a cup of coffee, but if you have a critical project or you are working with people you don’t know well, it is better to be formal. Ideally this should involve a face-to-face meeting supported by an e-mail or document recording what has been agreed. Ensure that you have allocated the time both to hand over the task and to follow up.
What Type of E-Business Would Benefit From Reintermediation?
Posted by: | CommentsThe giant Boeing Corporation of America is one of the more successful examples of re-intermediation. Where disintermediation is the buzzword that has come to mean the removal of the middleman, re-intermediation means that you replace that middleman with yourself; you become the intermediary for your own suppliers and customers. Boeing runs an electronic market place or EM in the USA. It has its own intranet or private network, as do many of its suppliers; it also has some very small and specialist suppliers who are not big enough to warrant an intranet. It also has customers. All of these are linked together in an EM where Boeing is the moderator. It maintains the links between all of its various suppliers and customers either via web links or private links. In this way, a single market place for the thousands of satellite companies and organizations which Boeing relies on is created. Boeing can monitor and control all the parts of its supply chain, from initial design through development and realization to purchasing, fitting and testing. It has an overview and a degree of control over how and when its suppliers and customers buy and sell. This gives it a power that extends much further than just purchasing power (where there are substantial gains to be made); it holds the ‘strings’ as it were, and has an overview that can help it in all phases of its business. This is B2B on a grand scale, but scale isn’t the only consideration. Businesses can link with other businesses in simple one-on-one partnerships and gain the benefits of this sort of set up – especially useful if you link with a business that is at a different stage of your own supply chain. For example, a furniture manufacturer might link directly with a timber merchant to their mutual benefit. The manufacturer has a guaranteed supply of timber, at an advantageous price. The timber merchant has a guaranteed market for the product. It is worth looking at your own chain of supply to see where such links can be made
Be your own developer
The ability to be your own developer still depends on your having a good business idea to develop – the idea must come first. What it does mean is keeping costs to a minimum by learning to do the different jobs yourself rather than hiring in anyone to do them. You could undertake to build your own web site, carry out your own design and minimize your outlay on anything expensive that does not pay its way.
What Can E-commerce do for You – Good Practice
Posted by: | CommentsThe enhancements which your e-commerce strategy can bring are closely allied to the benefits that your business brings its customers in the real world. Existing good practice should not be discarded but expanded to take account of the new medium. Think about how you currently do things and then at how e-commerce can improve this. For example:
- Can you take queries at any time of the day or night? Existing – you can use an answering machine, fax or e-mail.
E-commerce – now you can also answer questions through your FAQ and take orders and payments.
- Can you easily contact your customers with new offers? Existing – you can use mailshots or traditional forms of advertising. E-commerce – you can encourage them to visit you (or at least your web site) for information on new deals, products, offers, etc. If successful, this can do away with much of the need for advertising.
- Can you add value to your sales? Existing – you can add a personal touch, advice or information, special offers, incentives to return and make future purchases. E-commerce – adding value is the most important element of successful sales. You must use your e-commerce facility to ensure that none of the above is lost, but that something else is gained. A special discount for ordering online, for example, or products and features that are only available, or available at an earlier date, on your web site. It is vital to strike a balance between encouraging customers to your e-commerce facilities whilst not alienating those who still want to use your ‘traditional’ facilities.
Old and new
Don’t ever be persuaded into thinking that electronic transactions will totally replace ‘real’ ones. Shopping via the Internet, whilst not being anti-social, is basically an a-social exercise. ‘Shopping in itself is often a social activity. Think of the teenage shopping trip, or of going out ‘into the town’ or off ‘to the mall’. Think of what is involved in the ritual of shopping, most of which is lost if you shop online.
The Basics of Pure Dot.coms
Posted by: | CommentsThere are two distinct and different routes into business on the Internet. The first strategy is to set up as a pure ‘dot.com’ company (the dot.com refers to the suffix that identifies the business as an Internet company). This means coming up with a sound idea (that no-one else has yet tried successfully) and launching yourself onto the Internet. To emulate the most successful launches you will need to either have money or borrow enough money to get yourself up and running and then convince a high-profile celebrity or business guru to support your venture. This personality will then be expected to endorse the enterprise as you go for a stock exchange listing to raise the capital that you really need to stay in business. If you time this right (and sorry, you’ve missed out if you haven’t done this already) you can become an overnight millionaire with a business that doesn’t necessarily have to have actually sold anything – certainly it doesn’t need to be making a profit! If you are coming to the Internet now, however, you’ve missed the boat. Dot.coms have been through a rapid period of growth followed by an even more rapid period of decline.
Unrestricted growth could not be supported by the market and rapid decline and loss of confidence followed. The market is now beginning to grow again, but much more slowly and carefully than the first time around.
Fortunes (on paper) have been made and lost almost overnight. There are few (if any) unqualified success stories for dot.com start-ups. Even some of the best known and longest surviving companies have yet to actually make a profit. They depended not only on sales of their own products, but on advertising. Sales have often been slow to grow and distribution has not always fulfilled customer expectations. Advertising revenues were also slow to grow and many advertisers have condemned internet advertising as ineffective, so that even these streams of revenue can no longer be counted as reliable. What the shake out probably means is that a few companies will survive (and eventually prosper) either because they are big enough to ride the storm, or because they are small enough to have carved out a profitable niche market for themselves. Many, however, will sink without trace (along with the many that already have).