by The HLH Team
“The more inventory a company has, the less likely they will have what they need.”
-Taiichi Ohno
The Temptation of Over-inventory:
As dangerous a waste that over-inventory is, most business owners have fallen victim to it. Saving 15% when buying in bulk is a siren song that puts visions of high markups in our heads. But as we’ve learned, that’s not reality.
Usually, the extra good sit, and sit, and sit. We pay to store them, saturate our market with them, and then put them on sale to clear them out. 15% in savings is gobbled up by 50% markdowns and waste.
In business, buying or producing small amounts, frequently, tends to be the most profitable. We pay more on the front-end, but keep control and save more in the long run.
Over-Inventory at Home:
Shop at Costco? The lure of buying groceries in bulk brings as much waste as producing widgets in bulk. A new study from the University of Arizona confirms that shopping frequently costs consumers less by resulting in far less waste than buying bulk.
Our retail economy is built on people buying more than they need. If you’re in retail, you probably rely on that behaviour for revenue even as you’re cautious with it in your own business.
Saving Money:
Buying 6 litres of milk reassures us that we won’t have to buy anymore for a while. It also means we’ll be pouring 3 litres down the drain in a week.
Over-inventory is as expensive as it is comfortable. Lean methodology teaches us that staying close to the rocks, and only carrying as much inventory as is necessary, is the path to profitability.
At home, staying close to the rocks means buying 2 litres of milk at a time, running out sometimes, and never pouring spoiled milk down the sink.
Staying Close to the Rocks:
The next time you’re in Costco or anywhere else, remember that their business model is based upon consumers falling prey to over inventory. Interrogate yourself about what you really need to buy.
You spend your days at work eliminating waste from your company. Spend your evenings and weekend eliminating it from your personal life, and you’ll save money in both.
Cites:
https://uanews.arizona.edu/story/ua-food-study-shop-more-waste-less
by The HLH Team
“In your career, even more than for a brand, being safe is risky. The path to lifetime job security is to be remarkable.”
-Seth Godin, The Purple Cow
The Purple Cow holds an honoured spot on many entrepreneurs’ bookshelves. In it, Seth Godin challenges us to make our businesses different using a brilliantly simple analogy.
Consumer choices are like cows along a country road. There so many that no none of them stand out. No one remarks on them because what would the point be?
But put a purple cow in the field and every looks; everyone comments. With word-of-mouth being the most effective form of marketing (by far), businesses that are worth being noticed and talked about are the most likely to thrive.
Listen:
Are you listening to what people are saying about your business? If you aren’t, you need to.
Sign up for a Google Alert for your business here: https://support.google.com/websearch/answer/4815696?hl=en
The word-of-mouth is the objective, sometimes ruthless measure of if your business if remarkable or not. On the other hand, it may reveal negative threads that you need to address.
If you hear a deafening silence, then you’re probably a brown cow. Your job is to make your business worth noticing, worth buzzing about.
Becoming Remarkable:
What aspect of your business, be it a product, a twist on your services, a new design, etc, makes you stand out in your sandbox?
Your Purple Cow needs to be remarkable. 5% lower prices or slightly better service is not enough. It needs to be a game changer.
Now here’s the rub. You have thought a lot about how your business is unique, but does your customer know? Have you build a strategy around how your customer is going to learn about it, or have you buried it on page 2 of your website hoping the customers find out on their own?
Purple Cows aren’t modest. Unless you tell the world you’re awesome, the world will assume you’re ordinary. According to Seth Godin, those are the only 2 options.
More than a Sales Pitch:
Being remarkable gets you noticed, being useful gets you paid and retained. Being a purple cow just for the sake of it isn’t enough. Your business needs to have the depth enough to close the deal and turn your customers into advocates.
How much trust is implied in your industry? If you’re selling shoes or software, you can typically take more chances than if you’re a lawyer or life insurance salesperson. Be careful not to sacrifice the trust necessary in your first impression with too much glitz.
Being remarkable isn’t about a facade. It needs to run through the entirety of the customer journey, from brand exposure to advocacy. The savviest companies craft their Purple cow to reflect the value-added usefulness that potential customers may not otherwise see.
by The HLH Team
“A person who never made a mistake never tried anything new.”
– Albert Einstein
So you wanna sell your practice?
There are 2 important questions to ask. The first is whether or not the value of your practice is at its peak. This is gut feel, and largely determined by your energy levels as the key driver.
The second question (speaking of energy levels) is if you feel ready to move on. That’s not necessarily retirement. It may be that you’ve built up enough value to finance the next big step in your professional life.
How to Minimize Taxes:
Avoid the kneejerk “I should sell next year.” Starting 2-5 years out will have the best tax benefits. Here’s how:
- – You’ll have the time to consider whether to transfer the practice that you own personally into a professional corporation (your accountant can set one up)
- – You’ll have ample time to organize the assets and liabilities of your business to better present to a future buyer
- – You can consider whether you sell the assets of the practice/business (including goodwill) or the shares of the corporation. Selling your shares will ultimately help you tap into your lifetime capital gains exemption.
You’ll need to own the shares for at least 2 years before selling to get the exemption, plus time to set up the corporation and get the ball rolling. Not being in a hurry is your best bet tax-wise. The wait can help lead to great results from a tax perspective.
Consider that any gain on your personal income tax return (in the highest tax bracket in Alberta) will cost you 24% in taxes where a gain using your capital gains exemption will, in most cases, be tax-free.
Purifying your Practice:
No, it doesn’t involve any ancient rituals. To claim the capital gains exemption, and save a boat-load of tax, your shares must meet these criteria:
- – Must meet the 24 month holding period test (above)
- – Must be in a small business corporation (SBC – it’s how your accountant will structure your professional corporation)
- – Must meet 90% fair value test.
“Fair value” is the purity part. If more than 10% of your cash/ investments aren’t being actively used in the company operations (ie. excess investment capital), you’ll need to purify the corporation.
Sometimes purifying is straightforward (ie. using investments to pay down business debts), but other aspects, like extracting non-business assets, will require professional advice.
What’s it Worth?:
Now that we’re proactive about taxes, let’s ask the big question: what’s it worth? Selling your practice is like selling your home, in that its worth is ultimately determined by the amount someone is willing to pay, and you run the risk of losing your shirt without professional assistance.
Valuation is both complicated and surprisingly subjective. The key factors are:
- – Ongoing financial performance of the practice/business
- – Number of patients/ clients, and overall presence in your geographical marketplace
- – Economic climate
- – Number of potential bidders (hopefully more than 1)
Don’t rely on a canned formula to derive valuation. There’s too much at stake. This is where you need a professional the most, one who will take your business seriously and treat you like a unique entity with its own unique opportunities.
by The HLH Team
“You either disrupt your own company or someone else will.”
-Peter Diamandis
Manufacturing is changing. Quickly.
Companies are adopting advanced technologies quickly in order to stay competitive. Disruption is the new reality, and those who embrace it as an opportunity, instead of fearing it as a challenge, will sharpen their advantage.
When it comes to hiring, you can expect things to get a lot more competitive for high skilled positions. The people creating and operating the disruptor technology will have their pick of companies, whereas the low skilled workers being replaced will face an uphill road.
Those committed to Process Improvement will have powerful new tools at their disposal. Those who let waste slip through the cracks may find that, without a committed team, technology does little to increase their efficiency and bottom line.
The Robots are Coming:
Robotics is the most feared disruptor sweeping down on us. But while it’s easy to imagine fully automated factories putting swaths of people out of work, the reality of what’s happening is more complicated.
Fully automated factories are more popular overseas, especially in Asia, than in North America. We tend to be more skeptical of computers, here. Cobiotics, which is the pairing of a robot with a human operator, is becoming more popular in Canada than full automation.
One of the problems with computers is that they do exactly what we tell them to. Automation only works if there’s enough human talent on hand to build, program, and monitor it. If something goes wrong, it’s usually human error and the more automated you are, the more expensive tiny mistakes can be.
Robots can beat humans at many things, but they aren’t problem solvers. Tiny symptoms of waste don’t “bug” robots like they do us, and a computer isn’t compelled to make small changes to fix their environment.
The mainstreaming of robotics will herald a change in the job market. Like the other technological disruptors, it will threaten traditional factory floor jobs but will increase competition for high skilled jobs in software, development, and operators.
The Internet of Things:
Seemingly overnight, we’re able to lock our doors, adjust the thermostat and water our plants with our smartphones. When you apply that tech to manufacturing’s complex systems, you have the makings of a fundamental innovation disruption.
A connected factory would allow us to synthesize massive amounts of data quicker and analyze it on a deeper level than we ever could before. Expect competitive manufacturers to link all aspects of their assembly chain in real time in order to maximize efficiency.
Stanley Black & Decker adapted the Internet of Things into one of its plants in Mexico. The resultant change in efficiency, just by being able to tweak things like required voltage, optimal temperature, and monitor time waste, was impressive. Overall equipment effectiveness increased by 24% and output by 10%.
The Internet of Things is a potential boon for Process Improvement. Those wanting to eliminate waste incrementally over time will have access to more data and insight into where their waste comes from than ever before. Expect companies that embrace this disruptor pro-actively to start to emerge from the pack.
by The HLH Team
“Education is the best economic policy there is.”
-Tony Blair
What’s Your Perspective?
So much depends on attitude. Alberta’s economy was cut down when oil prices tumbled. It’s growing again, but modestly. And the sectors hit hardest, like energy, aren’t making the cavalry charge back to prosperity.
In 2017 and beyond, most forecasts point to a slow rebound. Whether that’s good news or not depends on your perspective. If you haven’t reduced your spending in the last 2 years and are pacing your office waiting for the boom times to return, modest growth is a bitter pill.
But, if you’ve cut all the expenses that the customer is not willing to pay for, then you’ll probably have trimmed enough waste to remain in the black, however painful it’s been, that modest growth could all go to the bottom line.
In other words, did you get brutal with your internal waste when oil started to plunge, or did you hold onto the expense accounts and are just waiting for the boom to come back?
Oil & Jobs:
2 key indicators for our economy, jobs and oil, tell the story. We’ve had some very strong jobs reports, but the dominant trend is caution. The sheer volume of layoffs in the past couple of years have changed Alberta’s job market and our consumer buying power in a fundamental way. We got used to the “boom” being normal, and things are not going to return to normal anytime soon. While that’s good news if you’re hiring talent, it’s bad news for selling pretty much anything.
The World Bank forecasts that although oil prices are heading up, it’s a long, sustained road upwards. Their forecast doesn’t have crude crossing 470/ barrel until 2025 and no $100 marks in site. The U.S. Information Administration forecasts that a barrel will average $55 in 2017 and $57 in 2018.
While a long way from the low of $26.55 it hit in January, 2016, it’s not enough to bring back “the boom.” The consensus is that our economy is growing like a turtle: slow and steady.
While growth is forecast, it’s not guaranteed. Events out of our control, from El Nino to Trump, can be disrupters. Also, while oil is on a slight upswing, big industry lags a couple years behind. Big projects planned for 2016 are winding down, but new ones aren’t following.
What You Can Do:
You can’t control the price of oil. But you can control the money that’s wasted needlessly in your company every day. Oil prices don’t sink companies; the 8 Wastes do. (Intro To The 8 Deadly Wastes). If you commit to eliminating waste, you’ll see the impact.
Attitude guides actions. Instead of “I’ll weather this storm and make it up in the good times,” consider “I’m going to find out what my customer isn’t willing to pay for and eliminate it.” Perspective starts with you and percolates down to your team and company.
Cutting waste doesn’t mean firing people. From inefficient transport schedules to machine downtime from lack of regular maintenance, waste is everywhere. Devote a portion of each day to finding it and pulling it out like a weed.
Being brutal with waste isn’t about dramatic actions. It follows the same pattern our economy is taking: small changes that, when sustained cumulatively over time, add to big cost savings. It’s the art of discipline, patience and, most importantly, perspective.
