When you think of business, the culture of business, the goals of business, what do you think of money, profit, power, greed, crushing the competition? Look, business can be those things. Sometimes it has to be about those things. But the reality is, that's for most of us that want to earn a living without compromising our morals, without hurting others to get ahead. Business is about creating good things. For customers. It's about satisfying our employees and our business partners. Make no mistake, business is about making money. But you can't make that money without customers, employees and business partners. Yeah, believe it or not, business is about making people happy, making people comfortable. It's also about learning and growing, so you can know how to make people happy and comfortable in the future. But remember, business is not about achieving one of those things. It's about doing all of them today, tomorrow, five years from now. 20 years from now, Greek business is not about overnight success. Great business is about indefinite success. Contrary to what movies may have taught you, business is not just about understanding money, be successful in business. You need to understand people, what customers want,
how do they want it? How can I get more from my employees? What kind of company do people respect, you need to understand infrastructure, buildings, roads, the internet, the legal system, you need to understand resources, supplies, raw materials, energy, you need quality resources at a good price. Business is art. And these are our paints and our canvas, money, people and infrastructure. That's the tangible stuff. How about the intangible stuff to be successful in business. You also need to be aware of what happened yesterday, what's happening right now, and how I can use data information and knowledge to make better decisions tomorrow. finance, accounting, sales and marketing, supply chain management, human resource management information, technology. Instead of thinking of these functions as being about investing, selling, manufacturing, hiring and firing, think of them as tools to help you understand money. And people think of them as data centers. Think of them as groups of people with knowledge. Think of them as AIDS in making decisions that will make people both happy and comfortable. wealth, power and greed. Those may be cool words to motivate teenagers that dream about becoming millionaires overnight, for the rest of us, those that actually work, those that want to create a better world, those that want to become active members of our global society. Get ready to learn about real business because by understanding money, people information, resources and infrastructure. By understanding how to make customers happy, you will have the ability to start and successfully run your own company, you will be able to get the most out of a nonprofit organization, you will even be able to maximize government's value to the community. And in the process, you will become a valuable resource for any organization, making money being profitable. That's the goal of every business. But it's not very easy. No matter how big or small. Companies of every size, often struggle to make a profit. I'm serious. How can that be? How can a company not make a profit and still be in business? Well, before we try and answer the question, you need to first understand the basics of profit. Profit is the amount of money left over after a company pays all of its bills. Profit is calculated using this simple formula. revenue minus cost cost equals profit. looks simple, but in fact, it isn't. That simple formula has so many layers. Let's first concentrate on revenue. Revenue is the amount of money a company collects from its customers. Cost. Cost is the sum of all the expenses for a company, we need to subtract all of the costs from the revenue. It's a very challenging balancing act. Every company in every industry is trying their best to tip that scale in the revenue direction. There are a couple of ways to do this. increasing sales can be tough. As a result, many companies try and control costs by cutting employee hours and using lower quality materials. But by doing that, you may alienate customers down go your revenues. Do you see the challenge? To grow quickly, you need to do things like buy more land, open facilities, invest in more inventory, and hire and train lots of new people. That's a lot of money. Their costs to constantly grow are very high. And so even a few months of good sales may not be enough to make a growing company profitable. start up companies often lose money for many years before they start making a profit. Soon you will start to see every story in the news as a signal of profit. Try right now. Go to a reputable news site and look at the headlines, war and terrorism. Does that mean lower sales for airlines? Does it mean increased sales for a military supplier? The price of oil? How does that impact the cost of a trucking company?
How does it impact the revenue of an oil company? Child birth rates increase, a new cancer drug is approved. A massive snowstorm is due to hit your part of the country, the government passes a new law. In each case, think about which companies will see changes in revenues and which companies face changes in their costs, making money being profitable. That's what businesses try to do. These are the big decisions business executives face on a daily basis. In business, every decision big and small has an impact. Decisions can result in consequences we anticipated, or they can sometimes take us in directions. We never considered impacting things we never imagined. As humans. Most often, we tend to first consider how things will impact us individually. Next, we may begin to consider the impact and those we know those we care about. And those we have to answer to in business, those who will be impacted by the decisions we make. They're called stakeholders. And as a business manager, it's your job to consider all known as well as all possible stakeholders, customers, employees, owners, investors, upper level managers and other fellow employees. They're all stakeholders that always need to be considered. Considering stakeholders isn't just about evaluating situations before you make a business decision, it may also be the key to influencing your employees or your boss, that change could result in a chain reaction of positive outcomes. They may not only influence how they feel about the recommended change, it may also get them excited about how this relatively small decision could impact them and those around them. The key to seeing and evaluating stakeholders is to have a powerful imagination. So as you make big decisions today, consider the stakeholders who are those that are most likely to be impacted immediately. Who might be impacted tomorrow, next month, next year, who might be impacted by your decision 10 years from now? Yeah, it might seem strange at first. But this is the first step in becoming a visionary business leader. What makes you valuable? Why would someone want to hire you? Don't be shy. If you don't take stock of everything going for you. You may be wasting something. So what makes you valuable? Do you have a special skill? Perhaps you're willing to travel? Can you speak multiple languages? Perhaps you're young and energetic, or maybe you have experience that most others don't have? Perhaps you have excellent connections. You have access to smart and influential people. Perhaps you have a car. These are your personal resources.
It's good to know what you have at your disposal. Because when you set a goal, you need to know what you have going for you. And you also need to know where you come up short. It tells us the resources we lack. It tells us what we need to get before we can actually go after our goals. Companies need to do the same thing. Very often. They have a large collection of people, machines, buildings and inventory that they can use to work towards their goals. And while most of the resources I listed for the company are tangible, like people, companies must consider their intangible resources. What are the intangible resources a company may have available to them? Perhaps they have a well known and trusted brand name. Maybe the company has a cool image that customers love. Perhaps the company has excellent credit. Or maybe the company is liked and trusted by important government officials. Like a person, no company has everything. And like a person companies can make the mistake of miscalculating their resources. We've all probably thought at some point we had a strength only to find that others were much better than us. Or perhaps we thought one of our strengths was really valuable only to later find out that no one really cared that we could do a handstand. It can be embarrassing when we discover that something we thought was a resource might actually be a weakness or a liability. In business. Being aware of your resources is vital in knowing what you have, and knowing what you need. It's critical to know that you have something special, something that could differentiate your company from the competition, or something that could be used to develop new products for reaching new customers. Knowing your resources is also vital in selling your company's potential investors. And in our cutthroat world, where the battle to get talented people to join your company gets more intense each day. Companies often attract employees by listing all the positive things the company has going for itself, basically by listing its most valuable resources. And as our world changes at such a rapid pace, a company will have a hard time staying competitive if they aren't aware of what they have, have been what they lack. Which of these Does your company have? Any one of these might be the thing, your company will need to get an edge. Any one of these might be the difference between being prepared to change or getting swallowed up by change. So let's first consider your goals. What do you want to do? Do you want to write a book? Start a tech company? Do you want to develop a video game? Now let's take stock of your resources? What are the resources you have at your disposal? What are the strange things you have that someone else might not have? What are your differentiators? Then ask yourself, what are the things you lack to achieve your goal? Okay, now it's time to get someone to believe in you. If you wanted me to invest in you, how would you try and sell me? Sure, having a good idea would be nice. But if you did have some valuable resources at your disposal, I'd probably feel a little nervous about investing in you to make that idea real resources. That's what makes you valuable. So you want to start business well, what kind of business I'm not talking about what you might make, sell or service. Instead, I'm talking about the ownership who will own and run your business. Let's go through some of the common forms of business ownership. Let's start with a sole proprietorship, one owner, with all of the management power, one owner that can claim all the profits. They carry all the risk and get all the rewards. But add more owners then we have a partnership. Each owner is a partner each shares in the profit. Do all partners run the firm, not necessarily a partner. That's actually in managing the firm is a general partner, a partner that invests money, but is otherwise not active in running the company. They're a limited partner. Perhaps a partnership wants to grow, but they need more cash to expand. The present owners can sell some of their shares in the company to investors. The company is now a corporation, those investors their stockholders. Therefore, they're the owners and they can easily sell their shares at any time. Corporations are legal entities in effect, they have legal rights just like a person, which means the corporation is responsible for anything that might go wrong. The investors at worst can only lose the value of their stock. But who runs the company? For a corporation? The owners, that is the stockholders they can elect a board of directors that board can choose the top executives in the company, but the Board of Directors cannot influence day to day activities in the company. What does this mean? Well, to a certain degree in a corporation, stockholders, own and managers manage. There are many other nuances in trying to choose the best ownership model for your organization. But hopefully, now you know some of the basics associated with the most common ownership models. And hopefully, you will be able to consider the important issues and ask the right questions as you move forward in developing your organization. What are the products you love to buy? The ones you love to shop for the ones you research electronic? Next cars, furniture, or maybe it's clothes. For people that love clothing, what makes money a great purchase what would make for a great shirt or dress? Perhaps it's the design of the clothing. What do you like classic, modern, outrageous, but to be truly great, it needs high quality fabrics. This is something you will want to wear again and again. And it'll lead to survive getting washed. Perhaps you value excellent workmanship, solid stitching, consistent sizing. Not all of us have an unlimited clothes budget, though. So the price will also be important to the customer. And the company needs to make a profit, so there'll be concerned with their costs. For some of us, we want something from a brand we trust or perhaps a brand that others will admire. So marketing and branding will be important. We can't visit every store online retailer, we don't visit every fashion block. So the clothing company has to get their clothing so that we can see it. So many things need to go around for us to find this one special article of clothing. And if they want us to buy from them again and again, they'll need to consistently satisfy us in all of these categories over and over again. It's no wonder that the most successful and progressive global companies value cross functional teams. So while you may expect luxury brands like Coach Chanel, Gucci, and Prada to be filled with dozens of great designers, our real business person understands that a successful company in an industry where creativity and innovation are required. A successful company needs cross functional teams, small, well managed teams made up of very different people with very different skills. So not only does a company like Chanel have great designers, but they also have people skilled in marketing, purchasing, manufacturing, finance, engineering, strategy, and probably a number of other areas. Each of those functional experts brings different skills, different problem solving techniques. Each is creative in their own way, each judges success in a different way. This is why companies like Apple, Nike and Lexus have such a long track record of success. Each of these companies values people that understand the importance of product quality, innovation, design, marketing, and of course, profit. As you consider your company. Its strengths its weaknesses. Consider the respect and attention paid to all the different functions in your company. Be sure your company gives a voice to a very group of leaders, they can see mistakes you wouldn't consider. They can also expose you to opportunities you would have never known about. Long term success takes a true commitment to cross functional teams. cost, quality, and speed are all related to company flexibility. For example, when you buy a car, you're given certain options vehicle color, leather or fabric interior, electronics navigation and media options, tire options, but they don't ask you the type of battery you want in your car. They don't ask you what kinds of spark plugs for your engine. They also don't ask what types of oil and antifreeze to use in your car. Why? Well, the company is trying to balance a number of things. They want to give you choices so the car feels special, so the car feels like it's yours. But they can't let you choose everything because offering the customer choices requires extra time extra inventory. And it's possible the customer really doesn't care. If the company offers you 10 different tire options for one car, they would probably need to carry inventory of all 10 tires, lots of inventory and low volumes, higher per unit prices from the supplier Plus, your workers now have to become more versatile. At the same time. When companies offer lots of options, customers might be willing to pay a premium to get exactly what they want. Also, when a company offers more options, it's possible to attract a wider market of customers. Now we have cars for people that like different colors for people that want luxurious leather interiors, and also for parents that would rather have cloth interiors that are easier to maintain. We also have a car that appeals to people that just want a car with basic stereo options, as well as families that want the very best media options for those long trips with the kids. So as your company develops new products and services, consider all of the possible options. Which options does the customer value most for each feature? How many options Will you need to offer? And are they willing to pay the premium for that option? Does that make your market bigger will offering that option deliver a profit at the same time? Which features are customers willing to accept a standard, standard features are easy to mass produce. If materials are needed, you can buy them in bulk for a good price. And fewer options might make it easier for a customer decide whether or not they want to purchase your product or service. The next time you go anywhere, a restaurant, a coffee shop, the post office, the grocery store, consider all the choices they let you make. Consider the ones they don't and then try and think about how the number of choices impacts their cost, their quality and their speed. In business, pretty much everything customers enjoy requires some materials. A great meal required delicious ingredients, a movie experience required comfortable seats. Even your massage was made better with fragrant nourishing oils. Companies must recognize that every material purchase is an opportunity to improve the product or service provided. Procurement and materials management are the segments of the company that suppliers, purchase the materials and then make sure that this inventory is stored and used effectively. If done right procurement and materials management can improve customer satisfaction, they can contribute to the company's profitability. And by partnering with reliable suppliers, they can help the company develop a stable supply chain that can be counted on to continuously deliver high quality products and services to the consumer to others straight these points. Let's use a cell phone as our example product. And actually, since we're buying parts for the cell phone, let's consider just one part of the cell phone the battery. What does our company need to think about? Let's first consider the consumer. What does the consumer expect. They want value, a long lasting battery at a reasonable price. They probably also want a battery that is safe, a small, lightweight battery that won't overheat. If this is what the customer values and if those are the things that we advertised, the battery in some way needs to fulfill the customer's expectations. A great battery helps make our phone better, a better phone will sell more units and thus our revenues go up. Now that we made the customers happy, let's remember that revenues alone won't bring us a profit. We need to consider our company's needs the company needs to control costs. While we're buying great batteries for our customers, we have to know what the total cost of purchasing these batteries will be. I'm not just talking about the per unit cost, you must consider the total cost of these batteries. The cost of storing batteries cost associated with theft and damage, the cost of negotiating and placing orders from battery companies and don't forget that someone needs to pay for the delivery of those batteries. So if keeping costs low is important to your company, you will need to remember, inventory costs include the cost to buy hold and order inventory. That brings us to the final party involved in our battery purchase the supplier. The battery supplier will ultimately dictate battery cost and the quality of the battery. But they also impact our cell phone company in other ways. If they can fill orders quickly, we can keep low inventory levels. Even if run out of stock, it won't take long to get a new shipment. For that kind of service though, we'll probably have to pay a higher price. On the other hand, a slower supplier may have lower per unit prices. But we'll need to carry more inventory since we have to place orders early just to be sure they'll be able to fill them before we run out of batteries. This takes care of our battery needs today. But how about the next generation of cell phones. We'll need stronger batteries that fit in our new phone design. And we still need to control our costs. In modern business suppliers our business partners when we sell more phones, they sell more batteries. On the other hand, if they make batteries better, we may sell more phones. Because of this suppliers and innovative manufacturers must work together to understand the customer develop new technologies and also to develop manufacturing and logistics strategies. Whether your company is buying cell phone batteries, tomatoes, theater seats or even massage oils. It needs to consider the customer the supplier and our company as you had Back to work today. Ask yourself these simple questions. Are the customers happy with the materials they buy? Or use? Do we consider our supplier partner? Our suppliers involved in helping us develop better products and services? And do we consider the cost of holding inventory? Or just the cost of purchasing? If your answer to any of those questions is no, you're likely missing an opportunity to maximize your company's potential. Look around you look at your stuff. How is your stuff made? Which items were made well, and which items were not which companies do you always trust to make good stuff, your favorite car clothing and electronics companies, they can only stay your favorites if they can deliver high quality goods over a long period of time. Good Manufacturing and quality control are vital components of building a global brand that customers are loyal to. So let's take a look at some of the primary issues manufacturing managers think about every day. And let's use a car company as our example. So once they have a design for a car, they need to know the demand. How many cars will be needed each month? Perhaps it's a brand new model. So we might not sell too many the first year. But forecasts tell us sales will grow significantly next year. So just how big should our facility be? Remember, a facility that's too big will be a waste of money.
But if it's too small, we risk not having enough cars to sell manufacturing cost is almost always a key consideration. So we have to know how much money will it cost for materials, labor, transportation facilities and energy to make each vehicle? How flexible is our manufacturing process? How many choices do we give customers? We let them choose? Car color? Do we offer a navigation system? Can they get upgrades on seats? Entertainment System sunroofs. Which brings us to quality. What exactly does quality mean to you? Aesthetics, durability, reliability, speed, manufacturing must make a car that their market deems to be high quality. And even then, what's good today won't be good enough next year. manufacturing facilities must be ready to continuously improve, then there's the question of where the cars will be manufactured? And by whom? Should we make them in the country where they will be sold? Or should we make them in another country? Should our company make them? Or should we hire a contract manufacturer to make the cars for us? What are issues manufacturers consider when making these types of decisions? Cost Of course, materials energy, labor real estate taxes?
Also, is it possible that the country has more access to skilled labor? Or do they have easy access to material and energy related resources? Perhaps the contract manufacturer has so much experience making these types of high quality products that you know, they can make them better than you could ever make them yourself. Location can also impact speed. Perhaps your location makes for easy movement of inbound and outbound materials. Perhaps your end item is big and expensive. manufacturing location may impact your delivery times and perhaps you might be able to have void import Texas currency might also be a factor. Imagine that you are selling a product in Europe invest in euros and getting paid in euros minimizes the chance that profits might be wiped out by big swings in exchange rates. And in some cases, choosing a manufacturing location might take into account the stability of the country. political stability, crime rates, inflation rates, labor laws and culture. executives don't want to have to worry about what might happen tomorrow at their factory that might be five or even 10,000 miles away. The companies that make your favorite stuff Apple, Lexus, Nike, Samsung Mercedes, they have transformed their corporate images into global brands. But without a backbone of high quality manufacturing, those companies would not survive. Making their customers happy means that every single product you buy from them meets or exceeds expectations. So as you use your favorite product today, think about who made it, when it was made, where it was made, and what they are doing right now to make the next product you buy from them even better. In just the last few years, the term logistics has gotten very popular. Global companies like DHL, UPS and FedEx are known as logistics companies. But what exactly is logistics? I mean, is it just getting finished goods to a customer's home or perhaps to a store where these goods can be put on a shelf ready for purchase. Yet, that's logistics, but it's just a small part of what the world of logistics encompasses. You see, logistics doesn't just happen in the last mile before a product gets to the hands of the user. Logistics happens before a product is even made. Even in the most simple supply chains. Raw materials and components are shipped to manufacturers finished goods are shipped to distribution centers and from their products make their way to a retail store or an online retailers picking and packing warehouse where finally they can be shipped to your home. All along the way. There are important decisions to be made that will impact whether the shipment was quickly delivered safely on time in the right amount and of course at a reasonable cost. Plus, we want to know that our logistics process is flexible, big orders, small orders, perishable products, heavy products, dangerous goods, orders destined for big cities and others heading towards a farm domestic orders and foreign orders. And nowadays, customers want to be informed. Customers want to have the ability to track their shipments, marketing and manufacturing are important. But a great product that comes with a big shipping cost and then arrives late, damaged or to the wrong address ruins the customer experience. As a result, Logistics specialists are constantly making decisions that must make customers happy and keep the company profitable. So how can a logistics manager keep the company profitable? Keep inventories low, move inventory as quickly as possible, and at the lowest possible cost. empty trucks and containers wastes fuel so keep trucks and containers full by planning effectively and don't get caught unprepared. stock outs for rush shipments and shipping errors are extremely expensive and can mean the loss of a customer forever. So in the end, logistics managers are tasked with making all sorts of decisions that balance cost, speed and customer satisfaction. What types of decisions? Well, should we use a truck, train, ship or plane what type of packaging is needed to keep the item safe. They also consider storage issues like what's better, having high levels of long term inventory sitting in a warehouse or low levels of inventory moving quickly through distribution centers. And if you're shipping globally, you will need to consider issues like import and export laws, tariffs, and documentation. You see, logistics is about a lot more than delivering. Oh, and don't forget, materials don't just move in the direction of the customer. reverse logistics deals with returned items, items requiring repair that needs to be sent to a repair center, and reusable and recyclable packaging. As companies look to control cost, reduce waste, and eliminate product loss while still getting the right goods to the right place at the right time. Companies need to consider all of the pieces of the logistics puzzle. Logistics is beneficial for everyone involved. customers get what they want, how they want, and when they want it. And companies can make it all happen with minimal cost and waste. Now that you have a better understanding of some of the vital pieces of the logistics puzzle, think about which pieces your company may not be considering whether your company has customers wants customers, or if you're already successful company wants even more customers, knowing that customer is vital to securing sales. So as a company looks to start selling their products and services, often one of the very key questions they need to confront early in the process is who should my company want as customers who is our target market? Well, your target market should probably include people that you're keeping of satisfying while still earning a profit. That way, they're happy and you're happy. So how do companies describe their target markets?
Well, target markets can be described in a number of different ways. Is your target market made up of men or women? How old are they? Where do they live? What language do they speak? What are their hobbies? What do they do for a living? How much money do they make for a better yet? How much money do they spend? And is it possible your target market is not made up of people? Perhaps your target market is made up of other companies. And it doesn't matter where your company is today. If you're a brand new startup company, a large global firm with a rich history, or maybe your future company is only an idea in your head. Knowing your market is important to being successful today and in the future. Why?
Well, a company, its marketing team and Salesforce have only so much time and money. They need to use their resources wisely. We're not just making sales. Today, we're building a target market that is loyal to our brand. So whether you want to know your customers desires today or tomorrow, whether you want to use your company's money and time wisely, or if you just want to find new customers for your products and services, understanding your target market is vital to the evolution of your company, friends, family, business partners, there are so many people in our lives and so many others we have yet to meet. developing and maintaining relationships with all of them can be difficult. But these are the people we count on for support, stability and growth. Nowadays, companies understand that their customers serve the same purpose. Customers support the company, a loyal customer base provides stability. In our present and future customers provide an opportunity for growth. So how can companies reach their customers? How can they create an emotional connection that will drive a person to buy your product or service? Well, there are three basic issues that need to be considered. Who's the target market you'd like to reach? What does the company want to say? And how will that message be delivered? Let's start by considering the target market. A good marketing department will isolate people that they would like to target as potential customers. Sometimes the market is quite narrow, so reaching most of them might be rather simple. On the other hand, some target markets are large and diverse. They contain people with very different lifestyles. This could pose challenges in reaching all of them in a simple and cost effective manner. So we may need to dissect the target market into smaller slices reaching each slice with a different message or using a different medium. Now that we know the market, what do we want to say to them? Are we trying to make them curious? Do we want to stir emotions, excitement, inspiration, fear, perhaps the goal is to build trust. Some companies want to invite customers to be part of a group. Ultimately, we hope the customer will be called to action. Make a purchase, join our Club, visit our website. While a good product or service will satisfy your customer. Customers need to be aware that the product exists. They must trust they will get value for their purchase, and they must be driven to seek out the product or service and then purchase it developing a message that can quickly inform and inspire and move someone to act. That's not easy. It requires creativity and a deep understanding of human behavior. With our message in hand, it's now time to deliver the message to our target market. How can we make contact with the customer digitally, in their cars at an event in a trusted atmosphere? Perhaps they hear about us through a friend or maybe they learn about us at a store. Each of those mediums is different. So a marketing executive has to be able to send the same message using different mediums. Is your message something that can be delivered using audio, video pictures? digital messaging? Is your message simple enough that it can be powerfully delivered by other people? All the while, we need to remember that our budget is limited. So as we consider identify the target market for our message, crafting a message for that market and then deliver that message so it is heard or seen by our customer. We have to ask ourselves, are we maximizing our investment. If we spend a million dollars to communicate with 200,000 potential customers, how many of those people will need to purchase our goods and services such that we make a profit? Relationships are a two way street. Both parties need to feel enriched by the relationship by knowing your target market, crafting a meaningful message and knowing how to deliver that message via multiple mediums. Companies can communicate with customers new and old. Customers are interested. They're actually considering making a purchase They've taken the step to seek out a representative or maybe they're at your website. Perhaps they even decided to visit your store. Now what what are some of the key issues that need to be considered in making that first sale and then having them purchase from us again. At this point, typically customers are looking for trust, comfort, stability, and growth. all play a part in moving a customer to make a purchase. Therefore, your people, your website, and your facilities all need to demonstrate that you are committed to the customer and their needs, that the company cares that the company will be here if you need assistance, and that the company is looking for opportunities to get better. The facility signage, furniture, cleanliness, how the company representatives look and act. The words that are used documents customers are required to fill in and sign they all carry messages. Are your people facilities and websites sending out messages that drive sales? Or are they driving away potential customers? Let's consider delivering. Even when a customer is ready to purchase from your company. They'd like to know when the product or service will be delivered. Fast delivery, free delivery easy in store pickup installation, it's important to know what your target market wants and needs. And it's important to understand what your competition is offering. The final hurdle in making a sale is processing the sale, especially on that first sale or with any major purchase. Before you give your money over to any person or company. A number of questions probably raced through your head. How many floors do I need to fill out? Why do I need to sign a contract?
What does the contract say? What types of payment are acceptable? When will they tell me the final end full price of the transaction? Before the transaction is complete? Will representatives push me to sell additional products and services? What are the options for canceling or changing my order? What happens if I'm unsatisfied with it? Purchase? What are the return policies? What happens if the item stops working? You are so close to closing the deal. And still, there are so many opportunities to scare away the sale. Whether you're selling to a new customer or returning customer, consider the importance of your sales resources, sales reps, facilities website, work to provide competitive delivery options and create hassle free business processes that protect both your company and your customer. Customers. They're here, they're interested. Now it's your job to show the customer that you are committed to giving them what they want, and demonstrating that the transaction is only the first step in developing a long term relationship. Whether you're starting a new business developing a new product or service offering or even if you're developing an improvement initiative at your company, you are exploring uncharted territories, and explorer may need food and supplies but in business, you will need money for our ventures. The question, of course, is how much money? It's a very difficult question to answer. Having lived through some failures and successes has its value, good and bad. Remembering the key to success in another project. For Better yet, knowing what killed your project last year can be vital to understanding the true financial needs of a new project. And the more during your project, the more unknowns there are. So having a vivid imagination can be useful in developing a budget. What will be needed if you run into design problems? What happens if your product catches on quickly? What happens if there's a product recall? truck accidents, warehouse fires a movie star you uses your product on TV? Are you ready for everything good and bad? Even when a company is an overnight success? It doesn't mean the company started yesterday and then became profitable today. They purchase materials and equipment they buy or lease offices and factories. They hire and train people and then they open the business. Does your financial budget have enough money to even get you here? Notice you haven't even made a sale yet. So far. It's only money going out the door. Now that sales begin you may be saying now we can be profitable. Not so fast. Until you pay for everything you have spent up to this point. You aren't making a profit. It could take months or even years before you're actually making a profit. Let's say it only takes six months to turn a profit Did your financial budget account for six months of wages, rent Materials, Energy equipment and maintenance office supplies? Perhaps you already start to notice that if sales continue to grow, you will need to get more space. hire more people use more energy, buy more machines and materials. Will you have enough money to expand even when revenues are just beginning to blossom. So whether you start a new company, launch a new product or start an improvement initiative, you will need to have the money to start the project, support the project before revenues are generated. And also be prepared to fund growth and expansion. If success comes quickly. discovery and innovation are exciting for any company, but they come at a price. Be sure your company is prepared to pay. Knowing how much money is needed to launch a business, a product or an initiative is difficult. But once you have a number, it's time to find the funding. Perhaps your company has the extra cash lying around even then though, you will need to show your plan and projections to the finance department and hope they think that your idea is worth investing in. If your idea looks like it'll get the company the best return on investment. Great. But for many of us, getting the money will not be that easy. So let's look at some options for borrowing the money.
This is called debt financing. Common types of debt financing include loans and bonds. A loan is a transaction where a borrower gets money from a lender and agrees to repay the money in a certain amount of time, sometimes weeks, sometimes months. And sometimes over many years. The lender could be a bank, a friend, a family member, or even a credit card company. Why does the lender give the money to the borrower? Well, the lender expects to make money by getting interest on the loan. And in the case of a secured loan, if the borrower does not pay back the money, the lender can take assets from the borrower as payback. If your company gets a loan, you're taking uncertain risks, you must be ready to pay back the loan or make periodic payments when the loan comes due. Not paying back the loan in time could bring penalty fees result in the loss of company assets. It could hurt your credit rating. And if you are borrowing from friends and family, you risk damaging the relationship. In some cases, though, companies could issue bonds. Bonds are essentially small scale loans from investors and just like a bank, they will pay you interest. However, if we don't want to borrow the money, what can we give investors. Instead of interest payments, we could give them a stake in the company. Big corporations can issue stock. each share of stock might be sold for $100, the company gets the $100 to invest in new ventures. The owner of the stock now owns a very small percentage of the company. How small well, some companies have millions or even billions of shares. But suppose a company sells even just 1 million shares, the company might be able to raise 10s, or even hundreds of millions of dollars very quickly. Small private companies, though, might look to venture capitalists. These folks will give you money, but they'll want ownership in return. For example, you might sell them 25% of the company for a $5 million cash investment. The company now has $5 million in cash. But in return, the investor will demand you grow the company such that their 25% stake in the company will grow as the company grows. Then again, some entrepreneurs raise money by selling parts of the company to friends and family. Again, this is very risky. They now feel entitled to make manage the company or perhaps ask for their money back if they don't agree with your management, loans, bonds and equity. Investments are sort of classic ways companies raise money. But nowadays, we also have crowdsourcing money online business competitions where startups present their ideas and judges award funds to one or more companies. Companies may also seek grants or gifts from the government or charitable organizations. Often this type of financing is available to companies that are either owned by or serve underprivileged or underrepresented groups. Look, raising money is not easy, and often it's not risk free. So understand your needs and understand the trade offs so you can explore the financing opportunities that are best for your company. Success is great. But now by In many cases, companies work so hard to break even that they never even imagined what to do with the profits. And strangely, the more profits that there are, the more questions there will be about how to use them. That's why the best companies plan for success. They already know how they'll use the profits, or at least they have ideas. In some cases, the answers are easy. If profits were promised to investors, you may need to distribute some of the funds. And if you have lots of investors, you may need to figure out who gets paid first. It's also possible that some investors may look to divest once the company is turning a profit. So the company might have to be prepared to give the investor back their entire investment plus any appreciation in their share of the company. If you didn't get your money from investors, you probably borrowed money for this or other ventures, you may want to pay for some of these debts. The government, they always want their cut, too. So your company needs to plan to pay taxes on those profits. And let's not forget about the people that made the success possible. How do you think your employees feel when the company starts generating profits? Proud? happy, excited. relieved? Yeah, probably. But they also probably feel like they deserve a reward. Is your company prepared to pay out bonuses to keep employees happy and keep them energized for the next few months? And while bonuses are great, some would something more permanent? Perhaps a raise or a promotion? Maybe education incentives for employees would just like to see the offices improved. And don't forget that your competitors will try and steal away your best employees in an effort to copy your success. Are you prepared to pay up to keep those employees perhaps you still have money left over? What else could you do? Well, you might want to continue to grow this opportunity. Investing in more people, facilities and materials may be required. You might need to invest in research and development, innovating this product or service, or perhaps developing new products and service offerings. It's also possible the company may want to invest in other companies and their new business ventures. And some companies even want to share their good fortune with others by giving to charities they believe in or investing in the communities where their employees live. And sometimes they provide special offers and awards to their customers. But the reality is, the best companies do not distribute, donate or invest all their profits, saving some of that money is an option. Times may be good now, but we never know what lies ahead. A bad economy, new competitors new business business opportunities. Having accessible cash in a company savings might be the key to comfort and happiness in the future. The world of business is filled with risk and failure. Any good business person knows that endless. They prepare to deal with adversity. But the best business people not only survive the day to day struggles of business, they are also prepared to deal with success. Is your company prepared for the challenges that come with success? If not, your success may be very short lived. why do companies decide to bring on new people, perhaps they need to grow a department. Maybe they need to replace a person that left? It's possible the company requires a new type of employee to fill a modern need whatever the reason to make it hiring decision, the company needs to be able to describe the position to be filled, what type of employee they want to fill that position, and also how much it will cost to effectively fill that position. Let's say we want to hire someone to redevelop our website, and then to manage and grow the website in the future. How would you describe the position so that it sounds interesting so that we can attract the very best candidates motivated professionals. But for a person with a bit of experience and for someone motivated to develop a strong career? This particular web development job sounds exciting.
They're interested. They like us. That's good. But do we like them? Let's tell them what we expect. Hopefully the unqualified have now moved on and the best candidates are now working on their resume. Look, we can't interview everyone. So we need to do our best to find great candidates and entice them to apply for the job communicating a job description and job requirements. And then being sure that the best people know about the job is only the first phase of finding a great person to join our company. Now that we have applicants, we need to figure out which candidate is the best fit for that job and our company. So how do companies figure out who to hire? Well, let's consider what we might want from our web developer. They need to talk to executives, they need to have the ability to develop creative content. They need to have technical skills, they have to understand our culture and our ethics. And they have to be trustworthy. How could you see if the candidates have everything it takes to be successful in this job? Interviews? Sure. But how could you test their ability to develop credit of content? How about ASCII to see some of their past work? Do they have a portfolio of work? How about technical skills? Perhaps we can have them take a test? Maybe we can give them some homework that they could bring to the interview? Are they trustworthy? Nowadays, most companies will also do some sort of background check with law enforcement and perhaps also with past employers. And once the interviews are over, you will also need to consider some other issues. What happens if no one is fully qualified? Will you be willing to take someone that is mostly qualified, also are your hiring practices legal and ethical? is diversity for your company, government mandated or part of a plan for Corporate Excellence? And who gets to make the final hiring decision, their new boss, a top executive, the person that interviewed them or perhaps someone in human resources and even when you find the best candidate and decide to make them an offer, there is still the question of whether or not they will accept the offer. The best candidates often have lots of options to choose from offers, counter offers negotiations and signing a contract may be all part of the hiring process. Once they accept the position, you will need to gather their personal information for company records and sign them up for a benefits package. Once we have them in the system, the new employee might go through a corporate orientation, and then they might get trained on equipment or business processes. Imagine going through all of that. All that time, all those resources and then finding out you hired the wrong person. Great people are the key to a great work environment and excellent customer satisfaction. Recruiting, evaluating hiring and training employees is extremely expensive. Companies that do not take these factors seriously waste lots of time and money and are then stuck with a subpar workforce. The best companies want the best people, they will fight for them. And once hired, the company is looking to get the very best that person has to offer. That means finding their strengths, identifying their weaknesses, providing opportunities to develop their skills and as the person grows, putting that person into leadership positions that will both help the company grow and also keep the employees satisfied. Bigger small companies want to measure the performance of their employees and the bigger the company, the more the company will rely on data. But which data? What should a company measure and why do companies measure? Companies measure because they need to know areas of strength from those strong people in groups, they can learn about success and pass along that knowledge to others in the company. Companies need to find weaknesses so they can fire people. Just kidding. firing people is expensive. There's no guarantee the next person hired will be any better. So finding weaknesses helps the company know what types of help to give those that are struggling in a company. We are all part of a corporate family. And as such, we need to help those in need. Think of it this way you hired them, so they are your responsibility. Another reason companies measure is to motivate employees. Think about a time someone said they were going to measure your individual output.
Did you up your game? Did you start noticing details. Perhaps you even started getting creative about how to solve problems. focused and creative employees companies love that. But remember, good measure will motivate good behavior. Bad measurements might motivate bad behavior. And while the performance metrics may motivate employees temporarily, they won't stay motivated unless they're rewarded for that excellent output. So the best employees will expect money promotions, awards job Security and corporate benefits for continued excellence. All of this is not easy though. Companies face all sorts of challenges in measuring and motivating, like what? Well, coming up with good performance metrics is difficult. Some things like attitude, customer service and work ethic are difficult to measure. Also, sometimes it's difficult to evaluate individuals when they work in teams. Even a single bad performer on a team could bring the whole team down. And even if a company can identify the best workers, it's hard to reward them all. Rewards must be doled out in a fair and legal manner. Also, while one employee may want more money, and the other may prefer a long term contract, or perhaps a promotion, and let's not forget that we also need to keep underperforming employees motivated, providing these employees feedback, giving them advice, and bidding them assistance requires excellent people skills. If you're too harsh, they may become timid, they may avoid making decisions and taking risks. On the other hand, if a manager is too nice, the employee may believe that there is no need to change their behavior. So let's take a little self quiz. Are you a good employee? What are your strengths? And you prove it to me with numbers? Based on your strengths? How can you help a company grow? About weaknesses? What types of training and support would you like from your company? Finally, if you prove yourself successful in your job, what would you expect in return? For many of us, coming up with answers to all of those questions can be tough. Now imagine being responsible for coming up with answers to every question for every employee in your company. If you can do that, and do it well, then you're doing what the very best companies in the world do. Do you love where you work? Whether the answer to the question is yes or no. The more interesting question is always why? Why do you hate or love your company? Let's look at some of the common issues that motivate us to love or hate our company. In some cases, we just don't like what we do. tedious work, simple work, repetitive work, interacting with angry people, delivering bad news to good people. Those types of jobs numb our brains, and they hurt our soul. Nonetheless, these jobs exist. And in many cases, these jobs are required and often, the people in those jobs know this. Still, in return, they want to be told that their work is appreciated. They want to know the company is working hard to make their jobs easier whenever possible. The place where you work can also impact your psyche. People love clean, modern and safe workplaces. They want a good balance of interaction with co workers and also areas of privacy, lighting, furniture, technology, the neighborhood, the restaurants, transportation options, the lunch room, all of these things can make coming to work each day harder or easier. And while the company can't give you everything employees appreciate when the company improves the work environment. There are many ways to pay employees hourly wages, annual salary, sales commission, your in bonuses, stock options. Signing bonus upon hiring each of these has its own pluses and minuses for the employee and the company. Some companies and employees want minimal risk. Others prefer to motivate workers based on their recent performance. So it's important to remember that some employees might prefer an annual salary. Others may want the risk and rewards that come with getting paid on commission, and perhaps others would like some combination of the two. Perhaps employees desire some personal benefits, medical insurance, retirement packages, is the company willing to take care of your family? Will they take care of your significant other? Will they assist with education expenses?
Can you work from home? How much vacation will they provide you? Perhaps they have free food and beverage in the office? Can you bring your pet to work? free shuttle to work or how about valet parking?
Perhaps they have a fitness center in the facility. There are so many possible benefits a company can offer again, though, while some employees may love all of these benefits, others may trade fewer benefits for more pay. For some employees. Job security is of vital importance especially for employees with families, a long term contract and a steady wage may be better than wondering if they're still be able to pay for food and shelter next month. And while long term contracts may not be possible for everyone, when an employee knows that they work at a company that value stability, cares about employees and their families, and understands when workers need time off to care for themselves and a family member. That type of commitment and loyalty to employees is something that can create a special bond between the company and their employees. Finally, the very best companies want employees that are always getting better. Why? Because some employees get new jobs. Some get promoted to better jobs in the same company. Eventually, some folks will retire and on occasion someone needs to be fired. Because of this, companies must develop all of their employees such that when someone leaves, someone else is ready to take over. And by educating and mentoring employees, exposing them to new projects and giving them promotions. The company earns the trust of their best employees. So let me ask you again. Do you love where you work? Hopefully, now you not only know the answer, but you also know why. Developing a satisfied workforce is tough to do. If you love your company, hopefully now you appreciate how truly special your company is. Much like romantic relationships, ending employee relationships can be difficult. And while some human relationships last for a lifetime, the same is not true in business. Eventually, employees leave the company. Sometimes they leave you. Other times you must end the relationship and like we're through romance, relationships. The end may be smooth and easy, but other times the end comes with friction. How can companies minimize the friction? Well, it all starts on day one. The day you hire an employee, what is said and what is signed, that is an opportunity for a company to make a smooth ending possible. Companies need to be sure not to set false expectations, and they must be clear about what would constitute termination. If the company is too harsh on day one, a bad relationship may have already started. If the company is not specific enough, it could shield bad employees from termination. There are a number of reasons companies terminate employees illegal behavior, inappropriate behavior, poor performance, lying about skills or past jobs. There are all common reasons for firing an employee. And unfortunately, even good employees may be laid off when a company is struggling financially. No matter what the reason a company must be truthful. They must tell workers why they let them go. And all managerial statements related to terminations and layoffs must be documented. Also, companies must be fair, all employees must be treated the same way inconsistencies employee evaluations may be construed as discrimination when appropriate. Consider providing departing employees a severance package why it can build goodwill, it can soften the blow when layoffs of good workers are required, and in a contentious parting of the ways it can bring about a swift resolution. In all these cases, though, it is important to document the purpose of the severance while terminating an employee for any reason can be difficult. Sometimes employees leave the company by choice. They may get a new job at another company, they may decide to leave to get a degree and of course, some folks decide to retire in all of those cases, it's vital to try and set up a final meeting and exit interview. This allows the company to thank the employee for their service, find ways to stay connected and ask them for their positive and negative experiences with the company in an effort to improve the employee experience in the future. In the case of retiree staging, a retirement event can be helpful to everyone saying their goodbyes and allow management to recognize the employee's complete contributions to the organization. The person retiring is celebrated and other workers may be motivated to build a deeper relationship with the company that takes time to honor employees that have given a good part of their lives to this company. The best companies know the rules of terminating employment. They respect labor laws when bad employees are involved. And they know the importance of honoring their retirees and they may even have specialists that are responsible for ending employment relationships in the company saying goodbye is never easy. But in the world of business, it's something you will need to face. Perhaps you like Starbucks coffee? Maybe you love to buy things from amazon.com. Do you have a Netflix account?
Where do you buy your groceries? Which cell phone provider do you use? The companies that sell you the things you need. They appreciate the purchases you've made from them, but they want to keep you as a customer. So they're probably more interested, not in what happened yesterday, but what you need today and what you will need in the future. Now more than ever, companies are relying on customer data to discover the mistakes they've made in the past and to help inform the business decisions they face today. The first hurdle in using data to make better decisions is gathering data. Some companies have an advantage, they require that you create an account. And then via digital devices, they can track all of your behavior when you use your account. Because of the digital account, they have your personal data, and they also have your transaction data. For companies like Amazon, Netflix and your cell phone provider. Gathering data can be rather easy. Grocery stores and Starbucks rely on frequent buyer programs, but they can also track all your transactions tied to your credit or debit card. Suppose the company wants new customers, they could use demographic data associated with current customers or they can gather public and sometimes private data from companies like Google Data consultants, and sometimes from the government. Data is special because it can be so personal. If you went and ask the data mining company what they knew about you, you'd probably be shocked, angry, frightened and perhaps a little little embarrassed. This is why companies that collect and purchase data about individuals must be extremely vigilant about keeping that data safe. The data your company collected could be used to defraud embarrassed or Harris your customers. It may reveal information about your suppliers that their competitors could use against them, and it could inform your competition about how they could steal away your customers. For data security is a threat to your customers, business partners and your very own company. Now, provided you can keep the data secure. The data collected may show changes in buying patterns of your grocery store customers. Perhaps the aging of your customer bases impacting the sales of calcium supplements. Data can show where most of Verizon cell phone customers are located. It can illustrate shopping patterns at Amazon that result in sales made and transactions that the customer never completed. It might even reveal how cloudy days impact the amount of coffee customers drink. The question is, is any of this important? And if so, what should the company do about it? The best companies, they don't blindly look through data. They pose interesting and important questions that relate to a specific decision. Then they look through the available data for answers. For example, should Amazon consider a lunch delivery service in metropolitan cities? Or should Netflix invest in programming targeted at Spanish speakers? These are directed questions that direct data analysts as to what to look for in the data. Understanding your customer, who they are, what they like, when they want it, how they're changing. It's the most important thing in developing a company. So next time Amazon, Netflix, Starbucks, or any one of your favorite companies announces a major change. Ask yourself how the data they collected drove them to make this change. And next time your company faces a difficult decision. Consider the challenges your company faces in gathering the data needed to find a solution to your problem. If your company doesn't already have a data specialist, make it a priority. Your company's future is counting on it. What would you say if I told you that Coca Cola is coming out with an electric car? Or that Starbucks was going to have live punk rock bands at their largest locations? Did you know that Apple is going to open a chain of Mexican restaurants? I'm kidding. Of course. None of those companies would likely invest in any of those ventures not because they couldn't necessarily make them successful, but rather because they your reaction to those announcements, Coca Cola manufacturing and electric car. Consumers would wonder really what do they know about cars? Would I want to tell people my car is made by Coca Cola? How about Starbucks have Live punk rock in their stores. That doesn't make any sense. That's not what their customers want. Even if some customers like punk rock, that's probably not the reason they go to Starbucks. In all of these cases, these major companies are limited by their brand. Coca Cola is a world class beverage company. Starbucks is a global coffee chain. Electric cars and punk rock just don't seem to make any sense. At the same time, though, their brands define them. Their brand will also inform customers about the expected quality level, it will help them launch related products and services. If Coca Cola announces a new fruit flavored beverage line, or even if they come out with a coke flavor line of desserts, some of their present customer base may be interested. Each product has a relationship to something coke already does. Similar product lines, similar flavors, and these would be products that would likely be sold in the same place. Other Coke products are sold. And how about Starbucks besides coffee? What defines them, their colors and the logo. The decor and ambiance of their coffee houses the gear taken in taking your order and making your drink that is part of their brand. If Starbucks announced new drinks, a new line of home decorations, a relationship with a charity or live in store music. A STARBUCKS CUSTOMER might be intrigued and perhaps in most cases, they would trust that Starbucks would understand what their customers expect. So we can see how Starbucks very powerful brand creates our opportunities for growth and expansion. And to a certain degree, why the brand may also be limiting. As your company grows. Consider your logo and colors your employees and facilities, your website and advertisements and of course, your product and service offerings and where you choose to sell them. Every decision in those areas begins to define your brand. A comforting and consistent message to your target market might result in customer loyalty and opportunities for growth. Mixed messages in advertising, product quality and the stores where your products are sold. They confuse or alienate your customers. So today, I want you to consider your favorite brands, or maybe Google most popular brands or most valuable brands. Consider a few of your favorite or maybe least favorite brands on the list. What does that brand mean to you in terms of product quality, corporate values, customer service, the types of customers they attract the places where their products and services are typically sold? Consider products and services you could see them develop in the future. Now ask yourself, Is your company's brand just as easily defined? Is your company's message consistent? Does your company's brand limit growth? Or do your customers trust your brand to develop new products and services in the future? Your brand, it's your identity. It carries messages to customers. Make sure you take special care to develop a brand that defines who you are and what you desire to be. Today we know Apple as a versatile innovator of handheld devices, iPods, iPhones, and iPads, electronics that changed the way we live machines that are both effective and efficient to use but also elegant in their design. Before the iPod though, Apple was a personal computer company. They didn't invent the personal computer. But compared to conventional PCs, Apple's computers were stylish, and many consumers felt they were so much easier to use. Their brand was defined by words like elegant design, user friendly, computing excellence. And then one day, this personal computer company decided to start selling portable music players. We all know how well the story ends for Apple. But when Apple made the shift to handheld portable devices, it was seen as a big risk. But Apple had a strong brand. Yes, a brand built on personal computers but also a brand defined by style and user friendliness. Plus Apple had developed such a loyal following that their customer base was eager to see if Apple can make music easier to enjoy anywhere. As your company manages its present state and considers its future. It's helpful to study a brand like Apple. Apple understands that its present offerings computers, portable devices, iTunes and their Apple stores are what connects them to consumers today. Excellence in product quality, service accessibility and overall value, they're vital to maintaining a strong brand. In turn, all the effort expended to keep customers happy today keeps apple in contact with their customers. This helps Apple understand its own weaknesses and also informs apple on changes in their customer base. The brand stays strong today, and the information can be used to develop new products and services for tomorrow. What's next for Apple? Who knows? But their ability to make machines and sell them you infant and convenient ways is opening up the possibility for Apple to sell nearly anything we find vital to our lives. If you love Apple, would you consider an Apple TV and Apple Car? How about Apple appliances for your kitchen? Apple use their reputation of elegant design, user friendliness and an intense brand loyalty to reach out into new product categories and services. What can your company use to expand its portfolio of products and services? Think about the words that customers use to define your company. How could you improve your image by making changes to your design? Your materials, your employees, your website? Based on your image? What would your loyal customers trust your company to make for them? Any good long term relationship requires us to be aware of the needs of our partner and also requires that we effectively communicate with our partner focusing only on our company and not the customer or listening to the customer without committing to change. Each could result in a broken relationship as we manage customer data. And as we develop our company's brand. Remember, we're working to strengthen and grow a relationship money, it's the lifeblood of the organization, it needs to flow. Money comes in from customers money must also go out to employees and suppliers. What happens if the flow stops no revenues from customers, the company dies, if we stopped paying people, no supplies, no employees, the company dies. So whose responsibility is keep track of the money flow? Finance know finance does deal with money. But their job is not to keep track of money flows. Their job is to obtain funds and also to invest them. Keeping track of the money flow is the job of accounting. They're responsible for tracking money coming in from customers money going out to employees and suppliers. And they're also responsible for keeping track of money flowing inside the organization from one department to another. Why is this important and who benefits from this tracking of the money. For that? Let's discuss the two types of accounting managerial accounting and financial accounting. Managerial Accounting keeps track of where all the money goes. This is important to people inside company. This helps with budgeting. It helps us keep track of departments that are using money wisely and it also tells us where there might be waste. Managerial accountants are the ones that tell us how much it costs to make and deliver a $2,000 television to the consumer. So, managerial accountants help managers inside the organization measure costs of production, marketing and everything else that goes on inside the company. They also assist in developing budgets for next year, as well as budgets for new projects. After the fact, they can then report if people are staying within those budgets. Plus managerial accountants find ways to help us minimize taxes. So, what did the folks in financial accounting do? Instead of being responsible for reporting to folks inside the company? Financial accounts are tasked with developing reports for people outside of the organization. Why is this important? It informs people about our company's financial status. That's important for anyone considering investing in the company and for organizations that might consider lending money to us. Plus, government agencies, special interest groups, employee unions, law enforcement, and sometimes even customers are interested in knowing about the financial activities as well as the financial stability of the organization. While financial reports are generated by financial accountants throughout the year, they work hard to develop the all important annual report. The Annual Report provides financial data, a written recap of events from the past year and a statement of concerns and opportunities for the company in the future. This information in the Annual Report will influence all sorts of actions and behaviors inside and outside the company. So financial accountants must carefully consider every word and every number in developing an annual report that abides by the laws of commerce, and does not mislead parties inside or outside of the organization. As you can see, having accountants both managerial and financial accountants helps a company learn from its past, understand its present financial health, and also plan for its future growth. You may not love accounting, but hopefully now you understand just how important they are for any organization that requires money to survive. What is your financial worth?
How would you figure that out? Well, to start, we'd add up all of your money and the stuff you own cash savings retirement accounts, your home, your car, and other property, we total it up. Those would be your assets. Now, for most of you, you'd also own money, bills, power water, cell phone,
we'd also add in credit cards, car loans, student loans, your mortgage, those are your liabilities. Now take your assets and subtract your liabilities. That is your net worth. For some of you, the number may be positive, you have more than you owe. For many others, though, liabilities exceed assets, you have a negative net worth. accounts do the same thing with companies except for company's assets minus liabilities gives us owner's equity. So what would be the assets for a company cash and investments machines and furniture, buildings and land and also vehicles? For the most part, those are tangible assets, but you'd also include intangible assets like patents, trademarks, and copyrights. How about corporate liabilities, companies have bills they pay off loans like you and I. But they might also have to make payments on bonds they issued to investors, corporate assets minus corporate liabilities, that gives us owner's equity. And again, just like with our net worth, sometimes companies have positive owner's equity. Other times it may be negative. So why not take stock of your personal net worth today, add up your personal assets, consider your personal liabilities, and then calculate your net worth. So often, we're caught up in just making money and paying bills. We get lost in the day to day finances. Perhaps by calculating your net worth, you will see your finances in the big picture. And perhaps it may change your financial behaviors. When companies examine their assets, liabilities and owner's equity, they're doing the same thing. They're looking at the big picture. Because while a company may have lots of sales and small bills to pay today, they may not be considering debts that may not come to for the next couple of years. So don't judge a company by what you see. Because just like your neighbor with the great house and luxury car, it's possible. The luxurious hotel you love may have lots of beautiful assets, but they may be loaded with millions in liabilities. In order to measure and report their annual profit companies will develop an income statement. An income statement adds up all sales and then subtracts all sorts of costs and taxes. One important thing to remember is that an income statement is an annual statement. So if you do a Google search for Starbucks income statement, it will likely generate income statements for the last three to five years. It's also important to remember that companies set their own beginning and end of their financial or fiscal year. So why don't you open up a browser window right now and find income statements for your favorite companies, see how they make their money and see where their money goes? Perhaps you will begin to better understand the challenges companies face in actually making an annual profit. Accounts are important to companies and investors. They tell us what's happening with money inside the company. They measure assets, liabilities, sales, expenses, inventory, and ultimately they tell us about the profitability of the company. I want you to start to see these concepts in action. Go to Google right now. And search, inventory turnover, Wall Street Journal, or earnings per share Wall Street Journal. What will you find? Well, not only will you find find articles about how different companies are performing, you will probably find articles arguing about what these different ratios may mean in different industries. And with just that little bit of knowledge, you will be able to form your own opinions about different financial ratios. How does the company get stuff done? Whether you're paying at the register getting a refund, placing an order from a supplier, or perhaps you're applying for a loan from a bank, good companies have documented processes that allow them to perform repetitive processes effectively and efficiently. Business processes are vital to any growing company. They allow for consistent high quality output. By documenting business processes, companies can expand quickly, they can essentially become cut and paste companies opening up new facilities by just repeating what is done and other facilities. So what defines a good business process a good business process must have good intentions, good corporate goals and good outputs. For customers. A good business process must deliver reproducible results. No matter which locations customers go to, they should have a consistently excellent customer experience. Finally, a good business process must be measurable and manageable. In other words, a manager must be able to see through data if the process is doing well or if it's struggling. And if the numbers are poor, a good manager should be able to guide employees to improve their results. So let's take a business process, we are likely familiar with placing an order for goods that will be delivered to our home. A process should have good intentions, what should be the company's intentions. First, take the order information, accurately, items names address payment information. Also, the process should be fast and easy for the customer. And perhaps it should be a low cost process for our company to perform. The process we create should be reproducible. So if we plan on taking orders over the phone, we need to create a process that is easy for our operator to carry out. Or perhaps we are Amazon, in which case, we have the customer do most of the work for us in an online form. But remember, we need the process to be accurate, complete, and it needs to not scare away the customer. In either case, though, we are likely using an online form that will be filled out by our operator or a customer. This helps us with the third consideration in developing a good process. This process needs to be measurable and manageable by having an online form capture the data, we can measure the speed and accuracy of the process, we can track the types of mistakes made. And with this and lots of other data, our managers can use simple and advanced metrics to figure out how to make this process even better. What types of business processes do you have at your company? In other words,
what are the things that are done over and over again? Now consider each process on its own? Does it have good intentions? In other words, does it consider all of the stakeholders? If this is a good experience? Is this experience reproducible? Is it good every time for everyone? Finally, what type of data is being captured? Can managers easily access the data to manage and improve the process for customers and employees in the future? Are there opportunities to save time and money? Can we improve quality business processes may seem small and rather insignificant. But the world's global organizations understand that business processes are the building blocks of any great organization. As your company looks to grow and expand, don't overlook the value of a great business process. What types of resources does a company have materials machines, money and employees. As companies seek to accomplish daily tasks, and plan for the future, knowing the resources available to them at any given time is quite valuable. What do companies use to track their resources? One of the primary tools companies use to capture and store data is called ERP that stands for Enterprise Resource Management Systems. ERP systems are tied to nearly every process in the organization. material purchases are tracked so we know what was bought from which company and how much was paid. new hires are tracked salary position in the organization and personal information is all captured. Machines are tracked which machines do we own? Are these machines scheduled for us the maintenance record for each machine should also be tracked. Even customer transactions can be tracked what was bought by whom, when what did we pay? As you can see valuable information related to time, money, people machines is all being captured and stored by the MRP system. And this information can be available to anyone in the organization sales, operations, HR, anyone. This can help a company make informed decisions about future purchases, about the types of employees we have and the types of employees we need to hire. It even tells us about how customers patterns are changing in a data driven world, having an IT system that is tied to our processes and our resources is vital. And while you may be at a small company now, it's never too early to start utilizing an MRP system. Is your company utilizing an MRP system? If not, the folks in marketing, sales, HR, finance, accounting, basically everyone, they probably don't have the data they need to maximize the performance of the company. Data Analytics is vital to maximizing performance in the modern world. Be sure your company is collecting and storing the data needed to make meaningful data analysis possible. Data is everywhere. Companies are inundated with data, data they collect and data available via the internet, the government and even via data consultants. The question is, what can we do with data? What should companies be looking for? I guess a data specialist would likely tell you that with the right data, a company can do nearly anything. That doesn't exactly give us a starting point, though. So let's look at some of the things we can track, learn and illustrate with data. What do customers want? They want companies that provide a good mix of cost, quality, speed and flexibility. Using Data Analytics, we can see the prices customers pay the number of returned items, internet ratings for our products and services, the time it takes to ship orders. Customers may want great prices, excellent quality, speedy delivery, and lots of options. But how can we be sure that is what they're getting? Data. Of course, if our numbers are poor, we know where we need to make changes. And if we're producing great numbers, we now have proof. We can pass along to customers via salespeople and advertisements. What companies want companies want to have effective products, services and processes. They want to deliver excellent results in the most efficient way possible, and they want to be able to adapt to changes in the market.
What does this mean? It means that as your company develops performance metrics, be sure you have performance metrics in each of these three areas. effectiveness, efficiency and adaptability. For example, effectiveness, how many cars did the company sell efficiency? How much was the sales and advertising budget to produce that many car sales adaptability, under what conditions were those car sales made? Were interest rates low or sales good everywhere or just in certain parts of the country. If your company isn't tracking data in alternate areas, it's possible the company may not be aware of weaknesses and opportunities that could impact the company in the future. Once a company captures the data they need now they have access to metrics that will guide them to the company's strengths and weaknesses. And this allows the company to identify opportunities to learn from the best and to provide assistance to those that need help and training. Most companies have discovered the importance of data analytics. As a result, we are now seeing companies that want to use this data to inform and influence others. In order to do this companies are concentrating on data visualization. Often companies are utilizing what is often referred to as executive dashboards. executive dashboards are like the dashboard in a car. They're designed to provide people with some of the most important data. These reports can be important to salespeople trying to make a sale or they can also be used by managers trying to find problems in real time. Companies are also finding that a well designed, user friendly dashboard can be used to motivate changes in behavior. When employees can see their poor performance numbers, they might up their game. When the managers see low performance at the Minnesota office, they can call the local manager and offer advice. Investors can increase or decrease their investment based on what is reported in your investor dashboard and some Energy companies even develop dashboards for customers so they can see their electricity usage patterns. Data is everywhere. So data analytics is here to stay. Make sure your company is maximizing the value of the available data. Be sure your company knows what to measure, how to use those metrics, how to effectively share that information, and then how to improve the behaviors of your employees, your managers and even your customers.