Adjust to Changing Conditions

A simple saying –  “Complain not about the wind. Adjust your sails.” – offers great business advice for Entrepreneurs.

In this troubled economic times and uncertainty, it is very easy to complain about all the things that are preventing Entrepreneurs from succeeding. Some of the issues faced by Entrepreneurs including cash shortages, employee layoffs and poor morale, unsustainable overhead and fixed expenses, misaligned ratios of variable expenses to revenues, customer and product/service issues, high debt levels and so on are ripe topics for complaining.

Losers will take this opportunity to complain and find excuses to rationalize their failure, just as a poor sailor frets about the winds.

Winning Entrepreneurs and leaders, instead, adjust their sails to move forward on a steady course. Finding ways to increase cash flow; having employee work-sharing programs and non-monetary motivational programs to boost morale; reducing overhead and fixed expenses; realigning ratios of variable expenses to revenues, customer partnerships and product/service improvement initiatives; and restructuring high debt loads are all positive ways to adjust the sails.

What would you rather do? Complain about the winds or adjust your sails. Do the Right Things!

Ravi Patel

http://www.patelCFOservices.com

How Will You Deal With Potential Inflation?

Given the extraordinary and irrational current and planned government spending levels and resulting deficits, it is not abnormal to anticipate severe inflationary pressures on the economy.

If the other anti-inflationary factors do not not kick in over the next few years, Entrepreneurs will be faced with huge inflationary risks for their businesses.

Does you planning process take such inflationary risks into account?  What type of counter measures are you planning? Entrepreneurs may want to be proactive and start now to develop strategies to deal with potential inflation.

Please contact us at Patel CFO Services (www.patelCFOservices.com) if we can assist you in this process.

Ravi Patel

www.patelCFOservices.com

AIG Bonus Issue – Lessons for Entrepreneurs

It is amusing to see the false outrage and hypocrisy from Congress and the President related to the AIG bonus issue. The focus is on bonuses of initially $165 million and maybe now to slightly over $200 million.  How ironic! The Congress and the President are spending billions, approaching trillions, of dollars – some for “pork-laden” projects.  Most of the spending that is supposed to be for stimulating or helping the economy is “iffy” at best. There does not seem to be any outrage over that! Instead, Congress is overreacting and passing retroactive tax increases to get the bonuses back!

Even for billions of dollars loaned to AIG there is no oversight as to where the money is being spent, rather the emphasis is on a relatively minuscule amount of bonuses; all for political grandstanding. Also, how about monitoring all the other billions of dollars that have been loaned to banks and financial institutions?

Entrepreneurs can learn from this fiasco.

  • Never overreact to situations where there is employee dissatisfaction or customer or vendor complaints. Analyze the situation calmly before taking proper corrective action, instead of taking hurried actions due to external pressure.
  • If you do have a serious situation, do not create a smokescreen and divert attention away from it to hide the real problem.
  • Do not focus on the small or minor issues in managing your companies; focus on the larger or macro issues for greater impact. Let your management team manage the details.
  • If you need to make a statement or message regarding any irregularities in your company, do it for significant issues not trivial ones. If you mostly emphasize minor matters, your employees or going to be dismissive of such gestures.
  • Be sensitive to the message that you send with your actions. If you are being austere or are having cost reduction programs, do not have bonuses or spending that is contrary to the current environment in your company. Having incentives is not inappropriate, but make sure that they are related to the right objectives and are perceived positively.
  • Of course, when you are borrowing a lot of money, do not spend it on bonuses or management extravagance. If contractual obligations are involved, renegotiate those for the long-term financial health of the company and goodwill for all stakeholders.

While the above sound obvious, sometimes we tend to lose sight of reality and the negative perceptions that are created.

Ravi Patel

www.patelCFOservices.com

Bailout Mania

Entrepreneurs must be puzzled about all this talk about bailing out mega corporations. After all, Entrepreneurs are held accountable for running their own businesses and prudently managing their financial situation. Why is it that the management teams of large corporations are not being held accountable in a similar way?

The initial strategy of the government infusing credit and liquidity in the financial system was prudent and necessary. Priming the economic machine with new funds to get it re-started was conceptually right on. However, the government bureaucracy and special interests took over in the implementation phase and the process now is really messed up.

The bailout of the insurance and auto industries, now spreading to other industries and even city governments, is getting to be detrimental. The whole idea of a free market system where companies have to perform well to survive is being discarded. Management teams of these troubled companies, instead of being held accountable for performance, are being rewarded with additional funds to mismanage them again. When and where will it stop?

What is needed is to let the free market takes its course – survival of the fittest; failing firms need to reorganize under bankruptcy or be bought over by stronger companies with strong management. I am not suggesting that we close down weak companies, but merely revamp them with new and better management to compete effectively in the open marketplace.

While this might mean layoffs and short-term pain, it would be in the best long-term interests of consumers, employees, other stakeholders, and more importantly the taxpayers.

Ravi Patel

www.patelCFOservices.com

Published in: on November 18, 2008 at 6:03 am  Leave a Comment  
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