As 2014 comes to a close, it is time to reflect on the changes that need to be made to achieve your goals in the New Year.
Typically, the No. 1 New Year’s resolution is to lose weight and be healthy, followed closely by goals to get more organized. Although many New Year’s resolutions are personal in nature, there are many simple changes you can make to improve the health of your company and make your professional life easier, too. Here are the issues our firm sees clients in the promotional products industry dealing with most often. Count them among your resolutions to get your business fit in 2015.
7. Build and review a monthly budget. The word “budget” is a scary word to some business owners who are good salespeople but lack formal financial education. However, if you are running a business, it is imperative that you get a grasp on the basic elements of your financial statements and begin to build a simple income, expense and cash-flow budget. Once your budget is in place, be sure to review it monthly so you will know exactly when and where to make changes. If building a budget seems too intimidating, then get a trusted friend or financial advisor involved. A budget is an essential tool to managing a successful business.
6. Develop a credit policy. We are amazed at how many distributors do not have a written credit policy. One of the most frequent reasons for losing customers and salespeople is misunderstanding payment requirements. The best way to get past these uncomfortable situations is to have a credit policy in place and communicate it directly to your customer before the order is placed. All employees and salespeople should know and understand the credit policy so they can communicate it to the customer. The best payment policy is getting cash with orders because the promotional products industry is a custom industry and the merchandise being sold cannot be resold. A credit policy should include payment terms as well as consequences for past-due payments.
5. Reevaluate your current commission structure. The standard industry commission split has traditionally been 50-50, where the company keeps 50 percent of the margin and the salesperson gets the other 50 percent. While many business owners will balk at changing the commission package for salespeople, a proper policy will not only provide excellent compensation to salespeople, but will also motivate them to sell more, solidify customer relationships and ensure that the company will cover overhead expenses and prosper financially. The industry has changed since the 50-50 commission split was first implemented, so you should consider the advantages of changing your structure accordingly.
4. Assemble a board of advisors (BOA). Often, when facing tough decisions, business owners struggle to find relevant advice.One of the most valuable resources business owners have is each other. A board of advisors is simply a group of trusted colleagues and/or friends whose opinions you value. A BOA can help with all sorts of issues from simple human resources questions to IT questions. One tip: When assembling the BOA, try to find people who have knowledge in areas where you might be lacking. For example, if you hate computers, then find someone who is strong in IT. Once you have assembled the BOA make a schedule to meet quarterly and discuss the issues or decisions you have been struggling with. One question about the BOA that always arises is how to compensate them. Many colleagues will serve for no charge assuming the commitment does not become burdensome.
3. Write a policies and procedures manual. While it won’t be your go-to book on your next vacation, a policies and procedures manual might just be the most important book you’ll ever own. In the current legal and regulatory climate, it is necessary to have a guide that documents and defends both the actions of a company and its employees. The operative word is “guide.” A good policy will not lock you into a rigid pattern of decision making. Rather, it will provide an outline for handling company issues as they arise. While premeditated control of all company decisions is unlikely, a framework for decision making in important or particularly problematic areas is necessary. A copy of the manual should be provided to every employee and a documentation of their receiving it should go on file. For a list of important items to include, see the sidebar.
2. Develop a succession plan. Lack of a plan is one of the most costly shortfalls we see in the industry. Whether your company consists of one or 1,000 employees, a succession plan is the best way to preserve and realize the value you have built in your company. Many people think a succession plan only addresses what to do when an owner decides he or she wants to retire. However, it can also address the development of talent and leadership skills within an organization. Effective and proactive succession planning not only sets an outline for future events, it defines the steps and strategies necessary to achieve company goals. Even in a situation where the company is sold to an outside party, most buyers want strong salespeople in place for a seamless transition. Because this type of plan takes time to cultivate, it is imperative to start the plan years before the transition actually takes place. If you are lost in where to get started, it is best to start by daydreaming. What do you envision for the future of your company? What practical steps can you take to start to get there? Documentation, while the first step, is only the beginning of the process. Start with implementation of the goals and policies that will strengthen your company from the inside out. Not only will the company be better prepared for the future, but it will also be filled with motivated and well-rounded employees.
1. Consider non-compete and non-solicit agreements. While sometimes controversial in the level of enforcement, a non-compete or non-solicit agreement can be one of the most important ways to protect your sales, trade secrets, good will and overall investment in employees. Many business owners question the validity or enforceability of the contracts. It is best to consult legal representation because laws vary from state to state, but the following factors are most often discussed when determining enforceability: length of time, geographic area, employee vs. contractor status, compensation for signing, overall restrictions and reasonableness of contract. Courts will look at these issues and how they relate to the overall protection of the employer’s legitimate interests. Regardless of enforcement questions, there is no doubt that every company is better off executing non-compete and non-disclosure agreements with every employee on the date hired.
Jamie Watson, CAS, BASI, is a financial analyst with Certified Marketing Consultants, Ltd., a PPAI business services member. She has been involved in various aspects of finance and accounting for more than 12 years and has provided consulting services for both supplier and distributor companies for more than seven years. Watson graduated magna cum laude with a Bachelor of Business Administration from Stetson University and earned her Masters of Accountancy from Manchester College. She qualified as a CPA in the state of Indiana where she worked for the regional accounting firm of Alerding & Co., LLC before joining the promotional products industry.
>>Policies And Procedures Manual:
What To Include
- Company Mission Statement
- Sales Policies
- Sales order completion
- Artwork procedures/cost
- Extra charges
- Order changes
- Credit policy/terms
- Preferred suppliers
- Gross profit percentage requirements
- Commission policy
- Accounting Policies and Procedures
- Internal controls
- Management report /frequency
- Reporting frequency
- Bank requirements/reporting
- Government requirements/reporting
- IT Policies and Procedures
- Routine backups
- Obsolescence policy for computers
- Software types and updates
- Key internal and external contacts
- Employee Policies
- Standards of conduct
- Non-disclosure agreements
- Work schedules
- General employment information
- Safety and security
- Employee benefits
- Employee leave policies