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  • 10/02/2018 12:03 PM | Anonymous

    REFRESHER: FLEXIBLE BUDGET, VARIANCES, AND MANAGEMENT BY EXCEPTION.

    Flexible Budget and its Variances.

    A flexible budget is defined as a budget that can be easily computed for different volumes. This clearly separates the variable costs and the fixed costs. Managers can use the flexible budgets to best determine the differences between forecast sales volume and the actual sales volume. This difference is called the budget variance.

    Budget variance is defined as ‘…the difference between an actual amount and a budgeted figure” (Horngren, Harrison, & Oliver, 2008, p. 1132). The variances can be interpreted as favorable or unfavorable depending on if the actual amount increases or decreases operating income.

    The concept of Management By Exception being applied to the Variances.

    Management By Exception is defined as directing “…executives’ attention to important differences between actual and budgeted amounts” (Horngren et al., 2008, p. 747). This means, the concept of management by exception could be used by a company to focus their attention on the most important variances discovered from the Actual Output versus the Standard Output budget.

    References:

    • Horngren, C. T., Harrison, W. T., & Oliver, M. S., (2008). Accounting. (8 ed.). Prentice Hall.


  • 10/02/2018 12:01 PM | Anonymous

    CONVERSATIONS: CAN’T FIND EMPLOYEES?

    Conversations – “I can’t seem to find any employees who will work here… and don’t know why?”

    Here is a conversation with a business owner… see if you can tell why this person is having issues hiring good employees? Would you agree with what I recommended here? I know this always seems easy when viewed “from the outside” but it is important to discover the sometimes “easy” reasons why things are not working and strive not to repeat them.

    A little background on the job position… it is mostly a “learn on the job” opportunity and does not require advanced education or experience as much as an interest in the field and a willingness to learn. It is inside work (no external sales) and only moderately physical.

    Business Owner: “I can’t seem to find any good employees to hire! I take out ads and state the job requirements. In the ad I also state the rate of pay is $12 – $14 per hour and I tend to get plenty of applicants each time I post the ad. But, after I interview them and call them to make the offer they tend to refuse the position. I can’t figure out what is happening.”

    Me: “Hmmm, that is interesting. I have reviewed your ad and the rate of pay for this job seems reasonable. When you interview the qualified applicants what do you tell them about the position and so forth? Is it different than what was posted in the ad?

    Business Owner: “No, I explain the position and what the typical work day/tasks are and they usually see this as a great opportunity to get into this field!”

    Me: “Ok, that really seems strange then… why would they not hire on with you? Do they tell you they found a different job already before you called them to tell them you wanted them to work for you? Did you just miss the timing here?”

    Business Owner: “No, that is not the typical answer… they just say no-thank-you and that they are going to continue to look elsewhere.”

    Me: “Ok, there has to be something that is changing their mind about working for you… what else do you talk about during the interview besides the work day and tasks they will get to do?”

    Business Owner: “Well, I also explain to them they would start out at around $9.00 per hour and that I just can’t pay more than that… as my numbers just don’t work out if I was to pay people more than that.”

    Me: I just sigh to myself thinking what can I say now? I have to be honest with this person as they truly did not see what they were doing.

    First, I thought to myself… can you imagine being on the potential-employee-side of the interview for this position? Would it feel like a “bait-and-switch” during the interview when the pay range was initially stated right in the ad for several dollars more per hour? And, then when the owner states they can’t pay more than this as the numbers can’t workout if the pay is higher… how would that make you feel about the future at this company? Would you hire on here? Probably not!

    So, I stated “I think it is very important for employers (and those doing the interviewing) to avoid insulting people and their intelligence during a job interview. The interview process is stressful enough for candidates and when you change the offered rate of pay at this point it can make a candidate feel like they were tricked. This is not a good way to start out an employer/employee relationship. You have to be careful not to make any candidate feel dumb or desperate during this process and I am afraid that is what is happening. Would you hire on to a company that told you these things?”

    Business Owner: “Well, I can’t pay them any more than that as I don’t have enough margin in my pricing to pay them any more. If I do… I can’t justify making this product”

    Me: “I believe you have a couple of different issues going on here. First, the immediate solution is fixing the dishonest ad and setting proper expectations for everyone involved… put the honest rate of pay in the ad as $9 per hour so your potential candidates know what they are applying for. Next, you need to review your business financials and product pricing to find out what can be done to make the product’s profit margin better (if possible). If you can’t make that happen this becomes a larger issue for you because it deals with the very foundation of the product and the company’s viability. But, assuming we can make the profit margin better by reviewing and adjusting the overhead and other costs, manufacturing processes and efficiency, and/or product pricing adjustments your company will look more attractive to join. We need the candidates to want to join your company because it has a bright future and will be a long-term employment option… with opportunities for occasional pay raises in the future. Who would want to join a company that tells them ‘this base is it… no way up from here as it simply can’t work to pay anyone above this base rate of pay’. If we correct these issues my guess is the candidates you offer a position to will gladly accept and show up ready to work for you and want to be part of making the company and product a success!”

    ~ Ron


  • 10/02/2018 11:59 AM | Anonymous

    REFRESHER: GROSS PROFIT VS. NET PROFIT

    A few more basic terms to refresh our financial analysis foundation of knowledge:

    • Gross Profit
    • Net Profit
    • Cost of Goods Sold

    Gross Profit (sometimes referred to as Total Profit) is found by taking the total received for a product or service and subtracting the Cost of Goods Sold (COGS). This does not include most of the operating/working expenses and fixed costs such as rent, insurance, and taxes.

    The Cost of Goods Sold (COGS) are the direct costs found in the production of a product or service. This includes direct labor costs.

    Net Profit (sometimes referred to as the Bottom Line, Net Income, and Net Earnings) is the actual profit found when you take the Gross Profit and subtract all the operating/working expenses.

    A common pitfall with business owners and managers is believing that if the Gross Profit is strong then their business will be successful. This is common in retail business where they plan to buy a product for $5 and then resell it for $10. At first, this sounds like a “can’t lose” situation, right? This is where the Net Profit is useful.

    If you look at the Net Profit in the example above it may show something different. If the operating/working expenses and fixed costs such as rent, insurance, and taxes are high the $5 Gross Profit can still result in a Net Profit of $0 very quickly and could even be negative.

    So, it is important that both Gross Profit and Net Profit are determined. It can show what needs to happen to make the business truly successful at the bottom line and decisions can then be made properly to maximize both Gross and Net Profit. On-going monitoring and comparing of year-to-year results will assist the business owner with moving forward in the best way possible.

    ~Ron


  • 10/02/2018 11:55 AM | Anonymous

    Refresher: Financial Analysis Terms as a Reminder.

    No matter your role (or title) in leading a business or how large or small your business is… we need to have a good grasp on the financial analysis methods and terms and how to use them.

    When we are able to run a company without debt (or issuance of stock), of course, the analysis is much more simple… and some of these methods/terms may not apply or be needed for everyone. But, below is a list of some important financial analysis terms and definitions and hopefully this can be a good refresher for all of us… as these can help determine a company’s operational strengths and weaknesses and aid in good decision making.

    Horizontal Analysis Results

    Horizontal Analysis is completed by taking comparative (for example year to year) statements and analyzing the dollar and percentage change by looking across each row of the statement. Basically, the analysis is completed to assist with decision making based on whether the sales, expenses, and income numbers are increasing or decreasing. Often, the dollar amount change is less important than the percentage change as this will be more relative and helpful over time. To find and complete the horizontal analysis we will “compute the dollar amount of the change from the earlier period to the later period” (Horngren, Harrison, & Oliver, 2008, p. 746) and will then “divide the dollar amount of change by the earlier period amount” (Horngren et al., 2008, p. 747) or what is referred to as the base period. This horizontal analysis will provide us with a “year to year comparison of company performance in different periods” (Horngren et al., 2008, p. 746).

    Vertical Analysis Results

    Vertical Analysis is analysis of a financial statement to show “the relationship of each item to its base amount, which is the 100% figure. Every other item on the statement is then reported as a percentage of that base. For the income statement, net sales are the base.” (Horngren et al., 2008, p. 749). The base amount when doing an analysis on the Balance Sheet is the Total Assets (or the total liabilities and equity line item). Since the vertical analysis compares the numbers for the line item, to the base amount, it can provide an indication about the performance of the company. For example, if a vertical analysis of the Income Statement showed a Net Earnings of 15% (based on the Net Sales amount) it would show the company to have a very strong earnings percentage. Of course, this would have to be compared to other competitors and industry information but the vertical analysis can provide performance indications.

    Trend Analysis Results

    Trend Analysis is used to indicate the direction of a business over a period of time. This can be as few as 3 years or as long as 5 or more years. Primarily, the trend analysis will show how Net Sales changes as well as the trend percentages over those same years. The Trend analysis percentages are computed by taking a base year (usually the first year in the trend numbers) and making this base year 100%. So, you take the year item number and divide by the base amount (and then multiply that result by 100) to get the trend percentage.

    Ratio Analysis Results

    For the ratio analysis, first, we would first look at a company from a liquidity point of view using the Current Ratio, Acid-Test Ratio, Inventory Turnover Ratio, and Average Collection Period.

    Working Capital Analysis

    Working Capital is defined as the measure of “…the ability to meet short-term obligations with current assets. Two decision tools based on working-capital data are the Current Ratio and the Acid-Test Ratio” (Horngren et al., 2008, p. 755). There are several ways to improve the working capital for a company. They could increase the current assets which include the cash and cash equivalents, increase the short-term investments, and increase the accounts receivables through more sales. They could also reduce the current liabilities such as reducing the accounts and notes payable, reduce the accrued salaries and related expenses, and reduce other accrued expenses.

    *******

    The Current Ratio is used by the company to evaluate the ability to meet its short term debts and is an evaluation of liquidity. To find the current ratio you divide the Total Current Assets by the Total Current Liabilities. This result will be the current ratio. The higher the current ratio is will allow the company to borrow easier on short term notices. If Competitor A has a current ratio of 4.2 and our company has a current ratio of 5.90 (strength) and then shows a decline the next year to 5.35 (strength) it shows our company sales and liabilities are strong when compared to the competitors current ratio. The example current ratios above can demonstrate that we can meet our short term debts and/or have access to short term borrowing.

    The Acid-Test Ratio is used by the company to measure the immediate cash available for short term debts. To find the acid-test ratio you divide the Cash and Cash Equivalents, Short-Term Investments, and Accounts Receivable together and divide by the Total Current Liabilities. The result will be the acid-test ratio. The higher the ratio the more immediate cash is available to satisfy short term debt.

    The Inventory Turnover Ratio is used by the company to measure the number of times its inventory is sold during the year. A higher inventory turnover ratio shows that the product is selling well. To find the inventory turnover ratio you divide the Cost of Merchandise Sold by the Average Inventory (found by taking year 1 Merchandise Inventory + year 2 inventory and dividing by 2). The result will be the inventory turnover ratio. If a company only ships their products when they are actually made… they would not have values for this ratio.

    The Average Collection Period (Day’s Sales in receivables) is used by the company to measure the average time (in days) that is takes to collect cash from credit customers. If the days in receivables are taking a longer and longer time to get paid, there is an increased chance we will experience trouble paying our own payables. To find the Day’s Sales in receivables we take 365 (number of days in a year) and divide this by the Accounts Receivable Turnover ratio. The accounts receivable Turnover is used by the company to measure the number of times the accounts receivable amount is collected each year. Using this ratio you can easily determine the number of days for AR and compare this to our company policy for credit time. A declining accounts receivable turnover ratio can indicate a collection issue and may be illustrating bad debts that need to be addressed. To find the accounts receivable turnover ratio you take the Annual Credit Sales and divide this by the Average Accounts Receivable. The result will be the Day’s Sales in receivables. If the result is a larger number of day’s sales in receivables when compared to other companies we may need to review our accounts receivable policies and billing practices to determine how we can reduce this period so we can get paid faster.

    Reviewing the Liquidity Ratios can show overall company strength or weakness.

    *******

    Next, Profitability Ratios, are the basic financial ratios on how well we are performing in terms of profit.

    The Debt Ratio, often called the Debt to Equity Ratio and sometimes called the Financial Leverage Ratio is used by the company to indicate the extent that we rely on debt financing. A high Debt Ratio can indicate a problem or difficulty with paying interest and principal if we obtain more funding. To find the debt ratio we take the company’s total Debt and divide this by the company’s Total Equity. The result will be the Debt Ratio. If the debt ratio gets too high the company would need to review the debt financing arrangements to get the debt ratio down… or better yet pay off the debt, if possible, and not incur additional debt.

    The Gross Profit Margin is used by a company to indicate the percentage of Gross Profit when compared to the base amount of the Net Sales. Using the vertical analysis data from the Comparative Income Statement can determine the Gross Profit Margin (taking the gross profit value and dividing it by the net sales value). If the company has a lower gross profit margin (compared to the industry standard and/or a competitor) it may indicate weakness for the profitability potential. If this is the case the company needs to review their product pricing and manufacturing materials cost to determine if the ratio can be improved.

    The Operating Profit Margin is used by a company to indicate the percentage of Operating Profit when compared to the base amount of the Net Sales. Using the vertical analysis data from the Comparative Income Statement can determine the Operating Profit Margin (taking the Operating Income value and dividing it by the net sales value). If the company has a lower operating profit margin (compared to the industry standard and/or a competitor) it may indicate weakness for the profitability potential.

    The Net Profit Margin is used by the company to indicate the percentage of Net Profit when compared to the base amount of the Net Sales. Using the vertical analysis data from the Comparative Income Statement can determine the Net Profit Margin (taking the Net Income value and dividing it by the net sales value). If the company has a lower net profit margin (compared to the industry standard and/or a competitor) it may indicate weakness for the profitability potential.

    The Earnings Per Share of Common Stock is used by the company to show the amount of net income created per share of the outstanding common stock. To find the earnings per share of common stock you take the Net income – Preferred Dividends and divide by the Number of Shares of Common Outstanding Stock (found by taking the Issued Stock and subtracting the Treasury Stock). The result will be the earnings per share of common stock. Most companies strive for a maximum increase or decrease of 10% – 15% change annually. Companies that show weak Earnings Per Share of Common Stock need to work hard to avoid a trend of remaining weak going forward and will need to either increase net income or reduce expenses to create strong earnings per share of common stock in the future.

    The Rate of Return on Total Assets is used by the company to show how efficiently each dollar is used that is invested in the company assets. A low rate of return on total assets indicates that the earnings are low for the amount of assets a company has. To find the rate of return on total assets we take the Net Earnings + Interest Expense and divide this by the average Total Assets. The result will be the Rate of Return on Total Assets. If the Rate of Return on Total Assets decreases year to year it shows weakness for the company and they would need to work harder the next year to use each dollar more efficiently to raise this rate.

    *******

    Next, we will discuss the investment and stock exchange ratios. These ratios are of interest to those who have invested or will invest in a company in the future.

    The Rate of Return on Common Stockholder’s Equity is used by the company to show the return on the common equity. To find the rate of return on common stockholder’s equity you take the Net Income – Preferred Dividends and divide the average amount of stockholder’s equity. The results will be the rate of return on common stockholder’s equity. It will be important that a company avoid weakness (or at least improve it the next year) to avoid investor fear. When we compare to the industry averages it is important that the variation from year to year remains within the normally accepted range.

    The Price Earnings Ratio is used by a company to show the market price of the common stock compared to the company earnings (per share). It is best to think of this as the way to show the market price for every $1 of earnings. To find the Price Earnings Ratio you take the Market Price per share of common stock and divide by the Earnings per share. The result is the price earnings ratio.

    The Times Interest Earned Ratio, sometimes called the interest coverage ratio, is used by the company to measure earnings that are available to meet interest payments. A lower times interest earned ratio means there are less earnings available for interest payments and this makes the business more susceptible to increases in interest rates. To find the times interest earned ratio we take the Operating Income and divide this by the Interest Expense. This result is the Times interest earned ratio. The higher the number the better a company can pay interest expense on debt. A weakness number relates to being in a worse position to pay the interest expense on debt. Increasing the operating income next year will improve the Times Interest Earned Ratio.

    ~Ron


  • 09/28/2018 5:18 PM | Anonymous

    MBA PROGRAMS – WHY STUDY LARGE COMPANIES ONLY? START WITH TINY BUSINESSES FOR BETTER LEARNING!

    MBA Programs – Why study large companies only? Most MBA graduates will not work in companies this large… start with tiny businesses and move up for the maximum application of the knowledge gained!

    MBA programs almost always use scenarios and examples during class studies of large companies when they should start with tiny businesses and move up for the maximum application of the knowledge gained. For example, I don’t remember a single study worksheet, scenario, or example for financials work during my MBA program to include a company under $100 Million in annual revenue (most were much larger)? Why is this? Is this realistic for anyone studying business? How many MBA graduates are going to start or continue their career (with an MBA) in a company of that size doing financials work? This level of company financials study might have a place in a program but the average MBA graduate these days will not be facing financials this large in their work.

    To be practical, would it be better to study companies with annual revenue of say less than $12 million annual revenue as a starting point? Or maybe less… like around $1 million per year? Or, how about starting with a company that has an annual revenue of $250,000 and make the examples very realistic? Anyone who has bootstrapped a growing company could relate better to these kinds of financials and would learn much more before moving on to larger examples.

    Consider, that at $12 million annual revenue (approx $1 million per month gross revenue) this would be a company with approximately 100 full-time employees. I know the number of employees per million in revenue will depend on many things such as average employee pay rates, other overhead expenses, debt load, profit margins, and so forth… but this is a good starting figure when converting revenue to the number of employees. So, if this assumption is correct, a $100 million annual revenue company would have approximately 800-900 full-time employees. I just think it is hard for early studies of financials to grasp that level of operation and its inherent differences from smaller companies.

    Even at $1 million annual revenue the number of full-time employees would be around 8-10.

    Based on my own experience, the study of a large annual revenue company’s financials makes for less application of the material and experiences. Assuming the goal of this study is solid learning and correlation of the knowledge gained, it should start out much smaller in scope.

    If some of the early MBA studies started with examples, scenarios, and work on financials for a 4-5 employee small business company the material would probably be more applicable. Then, once the concepts were in place they could add more “zero’s” to the studies and make it larger in scope and more complicated?

    As usual, I recommend starting (and maybe remaining) with the tiny business for maximum reward!

    ~Ron


  • 09/28/2018 5:15 PM | Anonymous

    WHAT DOES YOUR COMPANY DO AND OFFER? CAN YOU TELL FROM YOUR WEBSITE’S HOME PAGE?

    Question: What does your company do and offer? Can you tell from your website’s home page?

    I had been doing development work for a company for about a year when the CEO asked me in for a meeting, during which he asked me about their website and what I thought about it. Their call volume had been going down and he was concerned about the sales pipeline and keeping it in good shape. I thought it was interesting that he asked me about the website… as I was not part of the website team at that company yet.

    I said I had one primary complaint about the website and it had to do with the home page.

    I said “I cannot tell what your company does or offers to customers from looking at the home page”. It was literally that simple!

    Not one line of text, not one picture, image, or graphic showed what the company did!

    He laughed at the thought of this and asked me to bring up the website on my laptop… which I did. He then studied the home page and scrolled up and down and I asked him if he was a new visitor who just landed on this website… could he tell me what this company even does… and he laughed again briefly and within about 15 seconds he developed this very confused look on his face. He said “I can’t believe it… I have no idea what our company does from looking at this”. From that point forward, I was now tasked with fixing this problem, which I thought would take about 5 minutes to correct. I was wrong.

    As I worked on this issue I discovered that no one at the company could even tell me what they did in 2-3 sentences. There was a lot of “Well, you know… we kind of do this and that” and a lot of general references to specific tasks and tools they offered involved in their service. It was amazing to me that this company (at that time) had been in business around 5 years and no one there could provide a mission statement or even tell me what they did in a brief way.

    So, I quickly came up with a 2 sentence summary (or mission statement) that started with “Company X provides…” and asked if we could get this on the website as a good start. This resulted in a committee being formed and the “need to define what we do” became a huge mess. Literally, more than a month later the committee agreed that the original mission statement was as good as it could be and for me to get it on the home page!

    Uggh, frustrating isn’t it?

    At the time, I was in disbelief that this could happen… that a company, its CEO and managers, and employees would not be able to define what they did! But, I think this is more common than it sounds.

    If you are a company owner, CEO, or other interested person at a company, I challenge you to go to your website and look at it with the eyes of a new visitor. Can you immediately tell what your company does? What it offers in terms of services and/or products? Would it be clear to a potential customer within 10-15 seconds exactly what you were offering and how to get it?

    If not, it is very important to go through this exercise and straighten it out. If you need help with this exercise let me know… I have been through some of these before!

    ~Ron


  • 09/14/2018 10:35 AM | Anonymous

    I have gotten quite irritated lately with a few non-profit groups who are constantly asking (begging) for money from any one who will listen. I am not talking about a once every 4-5 year campaign to raise funds for good use that will make them more sustainable… I am talking about groups that want more and more money every year to feed their endless need to “grow” on the backs of their donors with no intent to run their “business” in a sustainable way. To make matters worse… it always seems they want that money right NOW and come across as desparate!

    Do you think I am talking about large non-profits… maybe national charities and so forth? Nope.

    I am talking here about non-profits that operate in local regions and small towns where their “client base” and donors are generally local people.

    Every non-profit should be managed in a way that makes them sustainable long term. This means, it should be run like a “real” for-profit business where the overhead and budget expense line items are kept to a minimum and allow all expenses to be covered with the income generated from the operation. But it seems many organizations operate with the belief that by filing their group as a non-profit it gives them the free-pass to dream up all kinds of new money “needs” without regard to being able to pay for it.

    If any business (for-profit and non-profit) fails to manage the overhead and budget expense line items by keeping them to a minimum and allow all expenses to be covered with the income generated from the operation, they will eventually fail. This is just a basic principle and no matter what the “mission” is… it will fail eventually… and they should.

    Let me give you an example of what I am talking about…

    Non-profit 1 (I will call it) operates in a small town. They believe they are immune from operating within a budget and because they operate under a church umbrella this gives them the permission to force people to donate to their “mission” if they ever need to raise more funds. Consider that (for the last 10 years) they have never met more than 50% of their overhead from the income their operation generates. The balance has always come from other annual donations and campaigns. They currently operate out of an older building and have effectively for many years but they now want a new bigger and better building. Not just a replacement building… they want it much bigger and better and believe if they build it more money will come in from the operation automatically. To put this into perspective… over 30 years ago they operated within a true budget (expenses were kept to a minimum and income was managed) and a group of individuals wanted to make sure they were setup for any future additional expenses they could not cover each year. So, they started a foundation that was intended to be a “once in a lifetime” campaign where donors would give a large amount of money one-time and this would be invested. The return on the foundation’s investment would be the amount “given” to the organization each year and would grow over time. It did vary year-to-year but most donors really liked the idea of not being asked for more money every year so they really did donate a lot as a collective group. The foundation worked well and the setup did provide a really good dividend (donation back to the organization) every year and it grew over time. But, after a few more years the new management determined “it just wasn’t enough cash” annually for even the basic costs and management. So, they started looking at ways to raise more money annually from donors. Sound familiar?

    Within a few more years, new “annual donation campaigns” were setup to “fill the gaps” that the foundation dividend didn’t cover. A few more years and they started two additional”annual help us” campaigns and so forth. During this time, their annual budget (line items for overhead) grew and grew. When the accounting reports were reviewed, these annual campaign donations were literally covering over 50% of their basic operating costs! And, this is not a non-profit that just gives things away to people… they charge for their services from most of their users/clients on an “ability to pay scale” so they do have an income model that could work.

    In the past year, they decided they want the new building to get started immediately no matter what and have started to fundraise aggressively. When donors asked to see reports on expenses/income and the balance today versus what it would be after the new building was built they were met with statements that “everything was fine and would only be better after the new building was completed” and “not to worry”. Literally, anyone who questioned the most basic expenses/income management were told “we first have to build this huge new building and it will mean more income automatically”. Oh, and “trust us…” was added for an even larger insult.

    Keep in mind, they already require the annual foundation dividend (that was supposed to sustain them into the future forever), plus a big annual campaign, plus several other small campaigns just to meet the current years budget (by over 50% of the income needs). In light of this, they still want to build a new (did I mention huge) building that will exceed any other campaign requirements they have ever had by a huge margin (at least 4 times). The current sale pitch is that this new building will have no additional operating costs and not require any additional maintenance over the old building going forward (because it is new)… but there are no actual numbers available to verify this crazy assumption.

    Are all non-profits operating this way? No, thankfully. I am not saying they are all doing this but many have gone crazy in their most basic business management assumptions!

    There is absolutely no way, when looking at the true costs of building ownership and maintenance (of that size), that a brand new (not sure if I mentioned it was huge) building will have no additional overhead costs and that no maintenance will be needed just because the building is new. The worst part is… there is no interest by this organization in looking at the real numbers to find out.

    I think they can take a lesson from applying a “tiny business view” towards their overhead and expenses and determine for real what is best for the long term sustainability of the organization. The most basic questions of what will this truly cost us?

    Non-profits need to be run like any other business (for-profit or non-profit)… and manage the business overhead/expenses with the actual available income and make the expense/income sides of the balance sheet work long term. If this is ignored… they will fail when they run out of other people’s money and that is a fact.


  • 09/14/2018 10:35 AM | Anonymous

    ——— Original Question/Message ———
    Subject: MailChimp
    Date: 6/10/18 11:00 am
    To: “Ron Gallagher” <ron.gallagher@roatcorp.com>

    Have you guys worked with MailChimp or Constant Contact? I’m working on getting a few email campaigns going but need to figure out the best way to integrate it with our website and social media?

    Thanks, Client A

    ——— Response Message ———

    Hi Client A,

    We have used MailChimp for several clients and also Constant Contact for many others. Both are easy and similar to use. But we should look at what you are trying to do (goals and so forth) with a newsletter service like this to make sure it is worth the cost/effort.

    My main recommendation with MailChimp… is that you shouldn’t use the “free” version. Mainly, it is because you don’t want MailChimp ads on the emails/newsletters as it looks bad to have anything that leads your customers away from your business focus. If you ever do surveys on the free MailChimp service level the user will end up on a MailChimp website page at the end of the survey with an offer to “get your own free account” there. I know many people use the free accounts including some larger companies… and I can’t believe they want their clients/customers (at the end of each survey) to be taken to the MailChimp site for an “ad” to signup for a Mail Chimp account.

    If you wanted to try MailChimp you can check it out with a free account and do some review/testing to see how you like it. But, when ready to send newsletters to clients/customers consider buying some “credits” depending on how many emails you plan to send… or you can go monthly for around $10/month. If your mail list is smaller (for example, around 100 emails) it may be a good option to just buy the email credits to try this out… as you could send 100 emails out once per month for 3 months for around $9. If your list is larger there are 1,000 email credits for $30… so that would last you 10 months if you sent to 100 people once per month… let me know how big your email list is and your thoughts on this.

    The big thing you should check… if you go with a “Paid” MailChimp option… does it remove any MailChimp ads from your newsletters, etc. We will want to verify this before you do anything with them as you don’t want your clients getting added to the MailChimp ads and getting promotions for MailChimp because you add them to your newsletter mailing list!

    Another option to consider is Constant Contact but they are a little more money than Mail Chimp. Constant Contact offers really nice email newsletters and no ads. You will want to look at their features and for lists under 500 total contacts they offer a free 60 day trial… might be worth a test/trial and see how you like this?

    Both services have widgets to add the online “signup” options for your website visitors. We can put those signup forms on your website, or link to them from your social media sites.

    Before we move forward with either service here are some big questions to consider when thinking about starting up a email newsletter strategy:

    • How big is your email list that you plan to send to? 100 emails? 500 emails? Larger?
    • How often do you want to send out the newsletters? Once per month? Twice per month? More often?
    • What is your goal for the newsletters? Is it to highlight a recent project or just to promote your business/services? To send coupons or timely promotions? Other?
    • Do you have a list of topics ready that you plan to cover for at least a few months of newsletters?
    • Will it be worth the cost to go with a paid service so the newsletters look professional and still give you a positive return on your costs/investment to get this going?
    • Finally, are you committed to keeping your schedule of newsletters (once or twice per month or more) going for at least a year or more? It will probably take that long to get noticeable results from a email newsletter program.

    Both of these services work well… note, we have worked with Constant Contact a lot more than Mail Chimp but either will work for effective delivery of your email newsletters.

    Let me know your thoughts on all this… and your responses to the list of questions above. Then, we can see what is the best option and path for you to take.

    Thanks!
    Ron


  • 09/14/2018 10:15 AM | Anonymous

    In this documentary from 2012… Steve Jobs – the Lost Interview he makes a very interesting point about how a mature company can fail.

    I have my own theory about why the decline happens at companies like IBM or Microsoft.

    The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important.

    The company starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company.

    Steve Jobs, 2012

    Watch the interview clip here


  • 09/14/2018 10:14 AM | Anonymous

    This quote applies to businesses too and how they are run on a daily basis. I am adding this as a separate post as a daily reminder not to complicate things…

    Simplicity is the ultimate sophistication.

    Leonardo da Vinci


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