Archive for May, 2009

Jim Collins is GREAT!

Read the article, RIGHT NOW, from the New York Times Business Section of May 24, 2009,  entitled “For this Guru, no Question is Too Big.”

I hate the tag “guru” applied indiscriminately! But Jim Collins is a GURU!.  He studies long before he writes.

And his new book “How the Mighty Fall: and Why Some Companies Neve rGive In” is perfectly researched, beginning in 2005, and timed, coincidentally, to coincide with his next “bout of flat out luck.”

The article says “Now the stages of decline that he maps out in the book – hubris born of success; undisciplined pursuit of more; denial of risk and peril,; grasping for salvation with a quick, big solution; and capitulation to irrelevancy or death – offer a king of instant autopsy for an economy on the stretcher.”

The article goes on to say that “institutional decline is a ‘staged disease – harder to detect but easier to cure in the early stages”.

The long article (read it here: goes on to say that “Vigorous debates continue on blogs about the merits of Mrs. Collin’s books.  One of the more thoughtful, on Business Pundit, says ‘The points in the Good to Great book may seem very general, however you’ll be amazed that not many people understand ‘general’ concepts like that things don’t happen overnight or the importance of facing facts.”

I expect you’ll be blown away by the article.


Close your Business – is now the TIME?

Last week another bit the dust:  a really sweet  small company who I’d watched over the past few years as it grew successfully, I thought.  It won local NARI awards, seemed to be highly involved in community activities, built a perfect office on a main street in town and genuinely cared about both clients and employees.

It went bankrupt!  I hadn’t known the financials or watched the struggle with an ever-increasing debt load over the same few years — but that’s where, it turns out, most of the capital for these investments came from.  Investments in land and build-out – not to mention the huge owner distraction – investments in marketing collateral, upgraded computer systems and new office personnel.  There was, for a few months, a new salesman on staff as well being trained in the latest Sandler techniques – not an inexpensive investment.

The capital invested came from a home equity loan – you can see the rest.  The economy turned, faster and deeper than most of us anticipated, credit dried up even for those with good credit, consumer confidence plummeted and the company couldn’t afford payments on the equity line.  When the bank called the balance on the line a month ago,  there was no escape!

The owner would agree with at least two of the following “5 signs it’s time to close your business” written by Joseph Anthony on the Microsoft Small Business Center.

The first is:  “your debt-to-asset ratio is on the rise.”  He goes on to say:  “effective and prudent use of leverage is an accepted part of many sectors of American business.  But the greater your leverage or debt ratios, the more debt you have to service, the greater the drain on your profitability and the less equity you have in your venture.”

The second:  “you’re losing money and the losses are increasing.”  See the post referencing Jay Goltz’ May column.

The third:  “your inventory turnover is slowing down”.  That means that you’re doing fewer jobs in the year, using your capital less efficiently and making less gross margin.

The fourth:  “you’re unable to raise more money for the business.” This is HUGE – especially now; no one I know is able to increase their credit limit; in fact many have had it cut in half if not by 100%.

And the fifth, but not the least important: “you’re not having any fun.”  Although it is hard, if not impossible, to have fun navigating the tricky waters of this ‘great’ recession, if you’ve been scared, angry and upset for months now, unable to find a way to put the Rubrik’s cube of your personal and business finances in order, perhaps it is time to close your business.

Don’t make such a momentous decision alone – talk to your family, talk to your accountant and your lawyer.  Investigate all your options and then, even then, proceed with great caution.  None of us (even those in power) know how long this recession will last nor how deep it will go. But if you’re already at the end of the proverbial rope, take action to learn everything you can about those options, decide on one and don’t look back.

If you’re young, you’ve got plenty of time; if you’re older, you’ll pass the wisdom down to the younger.

Here’s where I’d insert the MP3 “keep on believing” if I knew how.

New Diet – start today!

After my new-found excitement with energy efficiency I’ve read everything I could find which comes across my radar.

When I introduced the concept to my son and his wife last night at dinner my son, scientifically curious, immediately went on the web to google ‘super insulated houses’.  We read a couple articles of interest.

But this one is even more exciting:  an ENERGY diet which attempts to reduce energy useage by single family households by 50%.  Try it … get skinny today!

That’s where the money goes!

I know I said I wasn’t going to look anymore (at the “financial crisis”) but really, I was just reading along in Good Magazine recently (the spring 09 issue) and these incredible graphic displays caught my eye.  But this was too good to pass up.  Check it out!

And if you’re interested in the subject of information transfer – that is how to translate complex information into understandable building blocks which can be utilized effectively, then you’ll want to investigate the work of Edward R. Tufte.  His book “Visual Explanations” sits on my coffee table and provides not only good examples of effective information transfer but also poetic and beautiful images.

Check out

Heating with candles!

At first I was mildly interested and spent a couple weeks researching home performance contracting for a Benchmark column in Remodeling Magazine.

Then I became fascinated and read 3 dense issues of Home Energy magazine and googled ‘super insulated houses’.

Now I’m hooked!  I had lunch with a 4 advocates of HPC (home performance contracting) yesterday and one mentioned a house “heated with candles”.

The visual of a small compact house capable of being heated by candles was so compelling and so strangely beautiful to me that this small mental picture became of great scientific and social interest to me.

If the world of remodeling does not return to what many call the “glory days” of lavish jobs, expensive finishes and high end clients, what then?

One answer might be found in home performance, “a whole-house approach to energy efficiency, using diagnostic testing to determine problems and delivering solutions to those problems to the homeowner.”  Home Energy Magazine, HPC A Business Development Guide, September 2006, pg. 2

Although this work doesn’t have the potential sex appeal of a high end kitchen, for example, it serves a much bigger need for more of the population.  Steve Andrews, co-founder of the Association for the Study of Peak Oil, said “We are in the beginning stages of the transition from a cheap, abundant energy economy to one in which energy conservation will be increasingly important.”

One of 4 advocates at lunch yesterday, Doug Kennedy of Pathway D/C

( spoke convincingly of the potential benefits to current remodeling contractors of adding HPC as an adjunct to their current business model.  He cited the following primary benefits:

  1. Opens new doors for remodelers when others are closing;
  2. Provides free advertising and marketing through national focus on home performance;
  3. Utilizes government incentives, both federal and state;
  4. Allows for useful diversification
  5. Develops an ‘expert’ brand on the company;
  6. Produces higher margins on smaller jobs;
  7. Allows for more time with the client, thereby developing increased rapport and greater probability of closing the sale.
  8. Is ‘the right thing to do’!

The risks though, are huge as well, he said, including:

  1. Finding competent trade partners and ensuring quality control;
  2. Smaller job size requires better internal systems;
  3. Lack of clear national or regional standards allows for inconsistencies in training and delivery.

Before I buy candles, I’m going to look first at insulation, caulk and airflow.

Be your own CFO!

“Every business owner needs to be his or her own CFO!”

So says Jay Goltz in the May 2009 issue of Fortune Small Business, page 17.  I couldn’t agree more!

“Delegating that task to a bookkeeper or an outside accounting firm means putting your life into their hands.  They generally don’t know the ins and outs of your business well enough to make critical decisions.”

Over 25 years in business, working only with remodelers, I’ve met many who have delegated not just the bookkeeping but more importantly the understanding of bookkeeping and financial reporting to others.  The line typically is something like “I just hate that stuff, I don’t do it, Jennifer (or some other name, typically female) handles everything.  She pays the bills, she balances the checkbook, she does payroll.”

But, I ask who LOOKS AT the reports, who understands the trends, who cares about what they mean?

Now more than ever, you – as owner – must be your own CFO.

Leverage – who’s got it?

Warren Buffet in the May 5th, 2009 New York Times Business section said:

“Leverage is what causes people real trouble in this world.  You don’t want to be in a position where someone can pull the rug out from you or, emotionally, where you pull it out from under yourself.”

Hummm …