Tag Archives | relationship

More Questions Your Banker Wants Answered…

monopoly bankerIn a recent post, I talked about a conversation I had with our banker and the three questions she’d most like answers to.  In case you missed it, her questions were…

  1. How are you feeling about your business and the local economy?
  2. What is the outlook for the rest of the year?
  3. What are you doing about it?

More Questions Your Banker Wants Answered…

In response to the article, several of you reached out with questions of your own to add to the list.  Not surprisingly, the questions largely focused on what is going on in the Houston economy right now as a result of the decline in oil prices. Here were your thoughts:

1.  How is the current economic situation impacting your specific industry?

If you’re doing business in Houston you’ve likely felt (or will soon feel) the effects of the drop in oil prices.  Even if you’re not in the energy sector, your banker wants to know that you’ve taken a look at how the economic situation may affect you.

2.  What are the recent trends in your industry that impact your operations?

What other trends are affecting your industry?  Government regulation, increased competition, technology, substitution, etc.?  Your banker wants to know what your plan is to deal with these trends whether it entails mitigating risks or exploiting a competitive advantage.

3.  What are your 5- and 10-year goals and what are you doing today to achieve those goals?

It’s important to your banker to know where you’re headed in the long-term.  It’s easy to get wrapped up in the day-to-day operation of a business, but your banker wants to know that everyday decisions are made with the bigger picture in mind and not just reactions to the situation on the ground.

In the original article, I talked about the 5Cs of credit and how Character was the most important “C”.  Based upon your comments, I’d have to say that Conditions may be of greater importance (or at least more immediate) to you in the current economic climate.

Thanks so much for your feedback!  I’d love to hear what other questions you have.

Questions your banker wants answered

Share this:
1

Networking Lessons from a Green Beret

networkingMany of us struggle with the notion of networking.  We know we should do it, but how do you fit it in with everything else going on?  Given that the benefits of networking are often not seen until months or years later, it’s easy to put it at the bottom of the “to-do” list.

Networking Lessons from a Green Beret

I recently read an article about the power of networking written by Josh Wathen, a former Green Beret who is successfully undertaking the transition from battlefield to boardroom. I first came to know Josh through our office manager, Saundra, who is his proud mom. In the article, Josh describes his sometimes difficult journey from elite soldier to multi-tasking entrepreneur and student. What does Josh credit as the key to his successful transition?  Networking.  Here’s an excerpt from the article:

I learned how to network and used my Special Forces groups on LinkedIn to find and acquire my Territory Manager position with Rand Brands. I applied to the Wolff Center for Entrepreneurship (WCE) and began the educational experience that challenges and consumes me today.

Click here to read the rest of Josh’s story.

Josh’s article illustrates how important building and maintaining a network can be.  In his case, the network he formerly relied upon to save his life became the means by which he changed it.  Not everyone has such a powerful network, but we all have groups and individuals that we look to for personal and professional support and guidance.  Take time to develop those relationships.  They may just change your life one day.

Click here for more Networking Tips. Need guidance in networking? Download your free Networking for Introverts guide and start building your network today. 

networking lessons

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

networking lessons

Share this:
0

3 Benefits of an Analysis of Customer Profitability

analysis of customer profitability

Over time weeds grow in any garden. In the same way, unprofitable customers work their way into your company. To avoid the high costs of low profit customers, you should perform an annual analysis of customer profitability. Therefore, weed your garden of customers who are sapping your profits and cash flow.

Although there are many ways to look at your customer base, some of the factors to consider are sales volume, gross margin, profitability, number of transactions, and average sale per transaction. Looking at this information will not only shed light on those customers who are a drain on company resources, but highlight opportunities to sell more to higher margin customers who have low activity.

Analysis of Customer Profitability Benefits

1.  The elimination of customers that are costing you money.

Sometimes the costs may be indirect. Firing the customers with low gross margins is straightforward, but what about the customers that pay a good gross margin but require a lot of effort from operations? Not only do you need to address gross margin but you need to consider the costs to service that customer.

2.  Focus!

If you get rid of the clients that are high maintenance, then it frees your organization up to focus on the more profitable customers. While a successful strategy might be to cross sell additional products or services to those clients who value the relationship, another strategy would be to target new customers with the same characteristics as the good clients you have today.

3.  Increased Productivity Across the Organization

The benefits of weeding out high-maintenance, low profit customers will reach across the organization.  The sales department benefits by focusing their prospecting on the right clients who value and will pay for the company’s products and services. Operations and finance will realize improved productivity in servicing only those customers who are reasonable in their demands for service.  No more getting beaten up on margins, “special” payment terms, or Friday afternoon rush jobs!

The bottom line is the advantage of customer profitability analysis is improved profitability and cash flow! The two ingredients necessary to grow a company faster.

Learn how to apply concepts like this in your career with CFO Coaching.  Learn More

Your CEO needs to understand each customer’s profitability and for you to be their trusted advisor. Click here to learn how you can be the best wingman with our free How to be a Wingman guide!

analysis of customer profitability

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

analysis of customer profitability

Share this:
1

Manage your Banking Relationship

See Also:
Financial Jargon
Categories of Banks
Finding the Right Lender
Funding Source Versus Lender
Interest Definition
Is it Time to Find a New Bank?

Manage Your Banking Relationship

In order to manage your banking relationship a key strategy is to establish lines of open communication with your banker. Treat them as your friend instead of an adversary. If you are in danger of breaking a covenant, you could very well have a much better experience if you make the banker aware of the potential problem than attempting to hide it or delay breaking the news. The earlier the banker is aware, the more likely it is that they can assist you in mitigating the problem and finding a suitable solution for you both. In addition, the more trust you build with your lender, the easier it may be for you to borrow in the future as your needs change.

Managing your banking relationship is a part of being the trusted advisor to your CEO. Learn how you can be the best wingman with our free How to be a Wingman guide!

manage your banking relationship

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

manage your banking relationship

 

Share this:
0

Interest Rate in Selecting a Loan

See Also:
What is Compound Interest
Effective Rate of Interest Calculation
Interest Expense
Nominal Interest Rate
Interest Rate Swaps

Interest Rate in Selecting a Loan

Why is the interest rate in selecting a loan not the best indicator? First off, the interest rate is always important. It determines the size of your loan payments.

There are, however, other considerations which may lead a borrower to not select the loan with the lowest interest rate.

Flexibility

A lender who is willing to structure the terms of a loan more favorably from the borrower’s perspective may be offering a more attractive deal than a competing loan with a lower interest rate and more stringent terms.

Experience

A banker who understands the nuances of your company’s industry and has contacts within the industry may make a loan at a higher interest rate worth it. In addition, if you are considering a potential sale of your business a lender experienced in such transactions may make for a much smoother transaction.

Turnaround

Often it is crucial to have expedited access to borrowed funds. A lender who can process your loan within a short period of time may be your best option.

Relationship

Does the prospective lender have a significant interest in obtaining your business due to their size or their desire to enter a new industry? This may afford you the opportunity to establish a relationship and eventually obtain more favorable terms, including a lower interest rate in the future for your borrowing needs.

For more tips on how to improve cash flow, click here to access our 25 Ways to Improve Cash Flow whitepaper.

interest rate in selecting a loan
Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

interest rate in selecting a loan

 

Share this:
0

How to Manage your Lawyer

Manage Your Lawyer

Communication is a prerequisite for hiring a lawyer! Before a company and a lawyer can effectively begin dealing with one another on legal issues, they must be in communication with one another as to both parties’ goals and expectations. Either a lack of or breakdown in communications causes an inordinate amount of disputes (e.g., over time deadlines or fees) between clients and their lawyers. A business owner, or an in-house General Counsel of a corporation, explodes when presented with a bill for professional services that, regardless of merit and validity, comes as a complete surprise. Communication is the best method to manage your lawyer.

No Surprises

Clients do not like surprises! The General Counsel, or business owner, cannot afford to be kept uninformed or in the dark on a legal matter. He or she must report to an executive, or board, level that expects information that is accurate and up-to-date.

Gain Recognition

Communications is gaining recognition as an important service component in law firms. However, lawyers are not generally known for being proactive communicators with clients. Communication is often limited to a standard reporting letter sent out with a monthly bill or an after the fact report that a service milestone has been reached. This does not meet with the communication standards often placed on a General Counsel, or business executive. Typically, they are expected to keep other executives abreast of all current legal developments. The source of this problem is that lawyers do not have a professional level communications program in place.

Build a Relationship

General Counsels, and business owners, can change this. Start making communication one of the fundamental criterion in the relationship with your lawyer. Then, insist on a line of communication that is open and proactive. Finally, stipulate that you will respond to any inquiry on a legal matter within 24 hours. There is no reason that your lawyer can not respond with information that will at least inform you on the general status of a legal issue within this time frame.

If you want to learn how you can be the best wingman to your CEO, then download our free How to be a Wingman guide.

company's legal costs

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

manage your lawyer

See Also:
Ten In-House Secrets for Reducing Your Company’s Legal Costs
How to Keep Your Corporate Veil Closed
Corporate Veil
What Relationship Should the General Counsel Have With the Board
Red Herring
How to Manage Your Banking Relationship

Share this:
0

Supply and Demand Elasticity

See Also:
Economic Indicators
Balance of Payments
Stagflation
The Feds Beige Book
What are the Twin Deficits?

Supply and Demand Elasticity

Supply and demand elasticity is a concept in economics that describes the relationship between increases and decreases in price and increases and decreases in supply and/or demand. We have described it in greater detail below.

Price Elasticity of Demand Definition

In economics, demand refers to customers’ need or desire for a given product or type of product and their eagerness to purchase that product. The more customers want a certain product, the more demand there is for that product. Less desirable or necessary products have lower demand in the marketplace.

What is elasticity of demand? Price elasticity of demand refers to the degree to which demand is influenced by changes in price. Basically, price elasticity of demand describes consumers’ sensitivity to changes in price. For example, if the price of a product suddenly goes up, broadly speaking, fewer people will buy it because it is more expensive. Perhaps people can no longer afford the product, or perhaps they feel the product costs more than it is worth. Regardless, to some extent, at least academically speaking, when prices rise, demand falls.

If a slight price increase causes a large decline in demand, price elasticity is high. Similarly, if a slight price decrease causes large increase in demand, elasticity of price is high. On the other hand, if a large price increase is required to cause any decline in demand, price elasticity is low. And if large price decreases are needed to cause any increase in demand, elasticity of price is low.

In sum, if a small price change causes a dramatic change in demand, price elasticity is high – consumers are highly sensitive to price changes. If small price changes cause little or no effect on demand, and substantial price changes are needed in order to see any effect on demand, then price elasticity is low – customers are less price sensitive.

Elasticity of Supply

In economics, supply refers to the availability of a particular product in the marketplace. If a particular product or type of product is widely available in the marketplace, that product is amply supplied. If there is a dearth of a particular product or product type in the marketplace, that product is in short supply.

Supply is also related to price. When the price of a product rises, supply will increase. This is because the makers of the product want to maximize profits by selling as much of the product as they can while prices are high. This will flood the marketplace with that product, leading to an eventual overabundance of the product. When products are too abundant – when there is too much supply available – prices fall. If everyone in town has the same red hat, you won’t be able to charge very much for yours.

If you want to find out more about how you could utilize your unit economics to result in profits, then click here to download the Know Your Economics Worksheet.

supply and demand elasticity

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

supply and demand elasticity

Share this:
0

LEARN THE ART OF THE CFO