New Year’s Resolution

It’s the same thing almost every year. On the morning of January First, I step on the scales. BONG! 1-8- 3. One hundred eighty-three pounds. No surprise. I’ve felt it coming during November and December as my shirts and pants have gotten tighter. A little crackers and cheese here, some shrimp and dip there, a few eggnogs, and pretty soon it adds up.

“Man, I’ve got to tighten the belt,” I tell myself. Whoops. Wrong metaphor – the belt is already too tight, based on what’s within it.

I know what’s needed, because I’ve been down this route many times – 1,500 calories a day max., plus five rigorous one-hour workouts a week. A pound off every week and by mid-April I’ll feel much better at 168. Then maintenance: 2000 calories a day.

Eight times in the past 30 years (most often just before school reunions) I’ve lost 15 pounds or more – always within the 158-183 range. And eight times I’ve put it back on.

What have I learned from these experiences? Well, first that I shouldn’t be sitting here with a supply of red and green Christmas M & Ms between the keyboard and the monitor. Those won’t last until I finish this missive, and that’s a problem. More to the point, I should toss out everything I own that’s size 36 and above, all of those clothes that fit comfortably from 170-180. Then instead of being well-fed and blissfully unaware as I rise through the 170s, I’d feel the pain immediately and cut back, hopefully being too smart to make another capital investment in an enlarged wardrobe.

But I’ll do it the other way, the hard way. Little by little and nibble by nibble I’ll add those calories before waking up on New Year’s to face reality. Then I’ll go into big-time cutback mode and return some self-discipline to the corporal side of my life.

So it goes with a lot of smaller companies. They get religion sometime in late February or March, when they get the final year-end numbers from their CPAs and realize that they over-indulged – not just during the holidays, but all year long. Perhaps they mistook cash in the bank for bottom-line profit and thought that they had money to spend. Or they got a little complacent after several strong sales months and forgot to monitor their gross margins. Or, as customers pushed for shorter lead times and backlog declined, they got blind-sided by a couple months of low bookings.

Little by little, as small companies harvest their success, they start to sew seeds of excess. Overtime becomes an entitlement. The purchasing agent accepts the first price offered. One hundred percent inspection becomes ninety, and then eighty. The scrap rate creeps up. Inventory and receivables replace cash on the balance sheet. And pretty soon you’re feeling squeezed and overweight, even though the basic business is healthy.

YOU have been there before. You know what to do:

Financially Resolved –

  1. I will review with the management team the latest financials against the budget by the 20th of each month.
  1. I will hold my managers accountable every month for their performance against our agreed-upon metrics.
  1. I will insist that every capital expense achieves an ROI target of 18 months or less.
  1. I will develop productivity measures at all levels and track the results.
  1. I will require that average accounts receivable be at 45 days or less.
  1. I will force inventory down to less than 60 days’ supply.
  1. I will ask the marketing team to justify all of its expenditures in the context of resulting sales.
  1. I will develop an employee compensation plan that rewards productivity, reliability, initiative, creative problem-solving, and teamwork.
  1. I will maintain regular contact with my funding sources to anticipate periodic needs for capital.
  1. I will wake up every morning asking myself how I can increase the value of my company today.

Simple, right? A piece of cake. (Oh-oh – wrong metaphor again!) Then why is it that so many good businesses get in trouble? For the same reason that a lot of people (like me) are overweight. It’s a lack of consistent discipline around the numbers.

Sure, most people know what to do about their weight: I took the M & Ms off the desk right after I wrote about it. And most small company owners know how to maintain the health of their bottom line: monitor and control. But they need constant reminders, including a success model, to avoid being swamped.

So I’ll start my diet with a lot of other folks with the New Year. By Income Tax Day in April, I’ll be at 168 pounds – that’s the Resolution. But 1-6-8 on New Year’s 2015? That will take a full year’s commitment – and that will be a real Revolution.