Jane Yao's Blog

What would You do with $1,000,000

With $1 Million would you:

o Pay off debt?

o Purchase new equipment?

o Invest/save for the future?

o Give yourself a bonus?

$1,000,000 Waiting in the Wings

What do you and your business need that you have been putting off because you don’t have the money today? $1,000,000 certainly would fill those needs. But where do you find $1,000,000 just lying around your business right now? Well, you probably have $250,000 in each of four areas in your everyday business, and you don’t even realize it.

Money in Business Procedures

And so let’s look at four places in your business where we will find $250,000 each and see how we can help you find it:

Part 1: Inventory – $250,000.00

Part 2: Receivables – $250,000.00

Part 3: Sales – $250,000.00

Part 4: Accounts Payable – $250,000.00

Part 5: Procedures – $1,000,000.00

Turn Cash into Time with a New Company Policy

But just what exactly is this source for cash? It’s time. If you are looking for $250,000 then it costs you $4,808 every week that you delay. So what you do with your time quite literally amounts to either costs of delaying, or it can amount to savings when you take action and control of your time. To correct this cost of delay, an increase in velocity must follow – which will set the difference between ‘good’ and ‘great’. The consequences of this shift in system velocity increases discipline and competency: the ability to maintain the increased velocity and the ability to make the adjustments to achieve the ‘great’. So how do you realize the difference?

Eliminate Inventory and Increase Cash

Let’s start with the biggest, most obvious source – your balance sheet, specifically inventory. If you are a manufacturer with $300,000 or more of inventory (raw materials, work in process or finished goods) then STOP! We found it. Why? Because inventory is an unproductive asset. Inventory is money, and having it lying around your factory is not where your money belongs. So if we reduce inventory to Just-In-Time (JIT) levels, then we can eliminate 85% or more of your inventory, which translates into $250,000 in cash. But that’s not all. You will also save another $50,000 or more in annual inventory carrying costs. With less inventory, there are lower costs of holding inventory. Let’s look at an example of what we’re talking about.

Manufacturing Business Procedures Case Study

A manufacturing organization with 2 Million in average inventory balances needed assistance. We examined their inventory consisting of raw materials, work in process and finished goods to understand and quantify the workflow, workload, and demand forecasting issues. Then we designed and implemented a process to improve their inventory cycle and tie it closer to their actual sales.

The metrics we developed reduced their inventories by 85% and increased their manufacturing cycle efficiency from 60% to 90% within 120 days of implementing the new procedures. With these new processes and reports, the company now tracks manufacturing cycle efficiency and delivery time variance rather than just units produced, as the measure of their manufacturing effectiveness. The result: extra capital plus a 50% increase in process capability (capacity).

Methods to Design the New Process

By becoming more efficient in the process, we can use time not as a detriment but as a significant benefit to our business. Step by step, let’s take a further look at how time and efficiency plays a great role in your business.

Increase Demand Forecasting Accuracy. We only need enough inventory to satisfy demand, and that is where part of the problem exists. If demand can not be accurately forecasted, then we end up compensating for this unknown with inventory.

Increase Manufacturing Cycle Efficiency. How well manufacturing resources are used to produce a product determines the cycle efficiency. Defective product, product rework, and long lags between manufacturing cells cause inefficiency, which can be easily calculated. Raw materials should be converted into finished goods as quickly as possible. The speed at which this occurs defines your manufacturing cycle efficiency.

Increase Supply Chain Turns. Increasing the number of times purchases are made may increase acquisition costs and unit costs because of smaller order quantities. But you will benefit by increasing your cash flow and eliminating the carrying cost of the inventory (warehousing, material handling, taxes, insurance, depreciation, interest and obsolescence totaling 25% to 35%).

Eliminate safety stock. Safety stock is really just a buffer for forecasting variance and supplier delivery time. While many levels are set arbitrarily in automated MRP systems, your safety stock levels will need to be reduced due to improvements in demand forecasting accuracy, manufacturing cycle efficiency and supply chain turns.

Reduce purchasing errors. This can reduce overstocking and, more importantly, minimize stock outs that result in expensive expedited purchases. Sell excess and obsolete inventory or return it to your vendor.

Eliminate delivery variance. Do not allow vendors to deliver early or late and make sure the delivered quantity does not vary from the order quantity. After all, delivery errors cause the need to carry more inventory. Instead, provide suppliers with forecasts of future needs.

Train purchasing personnel. Provide your purchasing and material management personnel with formal training. This will arm them with better negotiating skills that will result in better prices and terms.

Procedures Provide Time Savings

So, as we have seen, we should use each element of the process to extract the most benefit from our business. With time-saving procedures set in place, you will let your efficiency work for you.

Time Savings Provide Cash in the Bank

With well-defined processes and procedures in place, you will increase efficiency by increasing inventory turns. And of course an increase in inventory turns means an increase in cash on hand. It’s there – all you have to do is grab it.

Next part of this series, we will look at finding $250,000 in Accounts Receivable – another step as we work toward our goal of 1 million in savings. So not only aim to reap the rewards of extra savings to your bottom line, but also see more cash in the bank – $1,000,000 to be exact.

“Vision is the spectacular that inspires us to carry out the mundane.” — Chris Widener

Can achievement be broken down into steps? Well, it isn’t always that clean and easy, but I do know that those who achieve great things usually go through much of the same process, with many of the items listed below as part of that process. So if you have been struggling with achievement, look through the following and internalize the thoughts presented. Then begin to apply them. You will be on the road to achieving your dream!

1. Dream it – Everything begins in the heart and mind. Every great achievement began in the mind of one person. They dared to dream, to believe that it was possible. Take some time to allow yourself to ask “What if?” Think big. Don’t let negative thinking discourage you. You want to be a “dreamer.” Dream of the possibilities for yourself, your family, and for others. If you had a dream that you let grow cold, re-ignite the dream! Fan the flames. Life is to short to let it go. (Also, check out my article “Dare to Dream Again,” Which has been read by close to a million people in the last 4 months alone. You can see it at the website.)

2. Believe it – Yes, your dream needs to be big. It needs to be something that is seemingly beyond your capabilities. But it also must be believable. You must be able to say that if certain things take place, if others help, if you work hard enough, though it is a big dream, it can still be done. Good example: A person with no college education can dream that he will build a 50 million-dollar a year company. That is big, but believable. Bad example: That a 90 year-old woman with arthritis will someday run a marathon in under 3 hours. It is big alright, but also impossible. She should instead focus on building a 50 million-dollar a year business! And she better get a move on!

3. See it – The great achievers have a habit. They “see” things. They picture themselves walking around their CEO office in their new 25 million-dollar corporate headquarters, even while they are sitting on a folding chair in their garage “headquarters.” Great free-throw shooters in the NBA picture the ball going through the basket. PGA golfers picture the ball going straight down the fairway. World-class speakers picture themselves speaking with energy and emotion. All of this grooms the mind to control the body to carry out the dream.

4. Tell it – One reason many dreams never go anywhere is because the dreamer keeps it all to himself. It is a quiet dream that only lives inside of his mind. The one who wants to achieve their dream must tell that dream to many people. One reason: As we continually say it, we begin to believe it more and more. If we are talking about it then it must be possible. Another reason: It holds us accountable. When we have told others, it spurs us on to actually do it so we don’t look foolish.

5. Plan it – Every dream must take the form of a plan. The old saying that you “get what you plan for” is so true. Your dream won’t just happen. You need to sit down, on a regular basis, and plan out your strategy for achieving the dream. Think through all of the details. Break the whole plan down into small, workable parts. Then set a time frame for accomplishing each task on your “dream plan.”

6. Work it – Boy, wouldn’t life be grand if we could quit before this one! Unfortunately the successful are usually the hardest workers. While the rest of the world is sitting on their couch watching re-runs of Gilligan’s Island, achievers are working on their goal – achieving their dream. I have an equation that I work with: Your short-term tasks, multiplied by time, equal your long-term accomplishments. If you work on it each day, eventually you will achieve your dream. War and Peace was written, in longhand, page by page.

7. Enjoy it – When you have reached your goal and you are living your dream, be sure to enjoy it. In fact, enjoy the trip too. Give yourself some rewards along the way. Give yourself a huge reward when you get there. Help others enjoy it. Be gracious and generous. Use your dream to better others. Then go back to number 1. And dream a little bigger this time!

1. Focus on the other

Being known as a ‘natural’ at interpersonal communication is not just a gift that a select few enjoy. We can all enjoy the reputation of being ‘a great communicator’.

Simply focus the conversation on the other person. This takes the pressure off you — you don’t have to be a witty bon-vivant to be a great communicator.

Avoid interrogating your new acquaintance, and if you are really nervous do your best to control twitches and jittery movements. And (best hint coming…) ALWAYS slow your speaking rate down. Nervousness makes us talk too fast.

2. The eyes have it

Here’s a great ‘rule breaker’: instead of sticking to the ‘respect someone’s privacy and personal space’ rule, when you meet someone for the first time give them a good look right in the eyes.

It’s well known that when we look at someone we find attractive, our pupils dilate, a phenomenon that the other person instinctively picks up on. Well, that phenomenon can also be put to good use in our business dealings, too. Notice the other person’s eye colour, say ‘great’ to yourself, and you’ll find yourself involuntarily smiling. The other person will pick up on your mood.

But try and avoid smiling lecherously, or as a vampire would when contemplating a tasty new neck…

3. Get over your ‘bad hair day’

Whilst ‘being yourself’ is always a good thing for relational honesty, try and disguise your inherent pessimism and bad mood from new acquaintances.

Even though you know you are just ‘having a bad day’ or a bad half-hour, the other person will probably decide that you are a ‘full-time whinger’, an impression and reputation hard to shake.

A bad mood will spread contagiously, bringing down the other person too. Better to start off positively; you can always let them see your ‘other’ side on another day…

4. “Mirror in the bathroom” **

Adjust your posture, voice and gestures to those of your new acquaintance. Establish rapport by mirroring their head nods and tilts. Speak at their pace and volume level. You’d be surprised by just how many different ‘voices’ a successful salesperson uses in a day — they spend a large amount of time mirroring the other person’s gestures, voice, language, pace, intonation and volume.

** (a wildly unsuccessful link to an 80s ska/reggae song)

5. Tread lightly…

He’s talking about his new Holden Commodore; you’re thinking of your new Impreza WRX. Or she’s talking about her latest small win at the office and you’re thinking about the new $1M account you just landed single-handed.

Which do you reckon will be more impressive: you gloating about your wins and toys, or you letting the other person have their 15 minutes of fame?

Good manners, as well as psychological research, dictate that to impress your guest you should always keep at the forefront of your mind the question, “How am I making the other person feel?”

Actively encourage others to talk about themselves, and respond genuinely — without bringing it back to yourself.

6. Focus on their achievements

Use flattery sparingly but powerfully by focusing on the other person’s achievements, not their personal attributes. Even if they suspect you might be brown-nosing, they will still get a warm glow from a well-directed compliment. “You have a great eye for colour; I really like how you have put the office decor together” is more flattering than, “Nice office”.

“I like your new BMW – you must be a real asset to the company for them to give it to you” is more flattering than, “So who did you suck up to?”

Similarly, “You have a great eye for colour; I really like how you’ve put your wardrobe together” works better than, “You look totally shaggable in that dress”.

7. It’s never too late

Remember, there’s very little that is unfixable in our interpersonal business relationships. There is usually always another chance to fix false first impressions.

Let’s say you arrive at a meeting late, having just copped a parking ticket from the previous appointment. Your mood is not, as they might say, triumphant and glowing. Instead of responding appropriately to a new acquaintance’s polite greeting, you mumble a grumpy ‘yeah’ and drop your laptop bag unceremonially into a nearby chair.

Okay, not a good start. But step outside the room for a moment, take a deep breath, count to seven (ten is too long a pause) re-enter the room and look your acquaintance in the eye. Apologise and explain why you are out of sorts. You might even want to turn it into a joke by saying something like, “I see you just met my evil twin.”

And remember to cut others some slack if they make a bad first impression on you, too! What comes around, goes around…