Identify the organization’s purpose and mission (a business plan); .
	Communicate business goals to employees; .
	Integrate business goals with the goals of individual employees; .
	Plan daily activities with these goals in mind; .
	Implement new technologies where feasible; .
	Increase employee participation in decision making and problem solving; and .
	Provide incentives to recognize individuals for a job well done.

Many larger businesses today employ the Six Sigma technique. This highly-defined process helps you focus on developing and delivering near-perfect products and services.  By studying the defects in your processes, you can systematically figure out how to eliminate them, thereby improving productivity.  General Electric is one business that utilizes the Six Sigma technique.  Jack Welch, the recently retired CEO of GE, may have exposed some of his managerial genius when he said, "growing productivity must be the foundation of everything we do." 

The productivity growth driven by new technologies over the past 20 years has allowed businesses to greatly increase the production capacities of their capital assets.  However, the benefits provided by this new technology can never match the ongoing reliability and potential of an organization’s motivated human resources.  The bottom line is that without people, there would be no technology, no productivity, and no profits.  Your human resources are your most important asset. So, the next time you walk through the reception area in your own place of business, pay attention.  Are you witnessing productivity or activity?

10 Things to Ask When Hiring a Consultant

However, while there are many options in the consulting continuum, finding and choosing the one that most matches your needs is another story altogether. These days it seems you almost need a consultant to help you hire one!

What can you do to locate and find the consultant that will do the best job? Consider these 10 questions you should ask when hiring a consultant. Some of these are questions to ask yourself, and your company or organization, while others are intended specifically for the consultant.

Question #1:  Have I done my homework?

First, do your homework by understanding your needs so that you know how to set engagement expectations. Ask questions to assess your situation. What areas are not running as efficiently as possible? Have you carefully written out your business plan for the next three to five years? What is it going to take to realize your goals? Where do you see yourself in the future, and what will you specialize in at that time? This helps focus the discussion with your prospective consulting firm.

Question #2: What kind of consultant do I need?

Once you’ve assessed the situation, you next must ask what kind of help you need. Often a problem is actually a symptom of a larger issue. Make sure you are being honest with yourself. Consulting engagements only work when companies and people are ready to make necessary changes.

Question #3: Can’t I educate someone internally to handle the responsibilities?

Life-long learning is great, but is it really viable to think you can train someone within the organization to handle additional matters that fall outside the realm of his or her current knowledge? Will the resources spent on training be more than it would have been just to hire a consultant?

Question #4: Should I hire a “firm” or “individual?”

Okay, so you’ve made the commitment to hire a consultant, and are faced with two choices – firm or individual. What are the pros and cons of each? A firm brings you several options and schools of thought, while an individual brings learned knowledge from years of experience. Which is better? The answer probably lies in how consistent the consulting firm is in its approach to use the same staff each time you need help. With an individual, you always get the same person, but with a firm, changes in staff may occur. If this is important to you, and you think the consulting engagement will be long-term talk to a prospective firm about their turnover rate.

Question #5: Do I need a specialist?

Working with a consultant that is certified in a particular technology, holds a specialty designation, or is committed to a particular consulting field will reveal many benefits that a general consultant won’t. These professionals commit many hours and several thousand dollars every year to ensure their skills are up to snuff.  If you’re uncertain what a particular specialty is, ask the consultant to explain it and its significance to his or her work.

Question #6: Who will be the liaison to the consultant?

Even the freest spirit enjoys some order, and in the case of working with a consultant, someone within your organization must be appointed as the person responsible for working directly with the consultant or consulting firm. While the reasons may be obvious, consider the chaos that might ensue if several firm personnel were to ask the consultant questions or assign work without anyone prioritizing the list. You’ll end up with confusion and unproductive time.

Question #7: How much should I pay the consultant?

What is your own time worth? Consultants are in the business to make money just as you are with your firm or business, and to a consultant, any moment not spent conducting business is considered a loss. Ask the consultant about his or her rates, and be prepared to pay top dollar for the best talent. Network with peers in similar size companies to find out what they pay their consultants. If a return on investment (ROI) is critical, consider asking the consultant to work out a contingency deal based on results. This is becoming more commonplace in today’s competitive market.

Question #8: Does the consultant have to be local?

Not necessarily. Many companies enjoy a tremendous relationship working with consultants who are located across the country, and much of the business may be handled online or through conference calls with personal visits scheduled sporadically. Just because a consultant may be local doesn’t give he or she an edge, unless you’re looking for consultants who can “drop names” or assert influence in your local community.

Question #9: Should I interview several consultants?

Why not? Unless you are strapped for time, interviewing another firm can do nothing more than let you know you are making the right choice. Of course, if you have an established relationship with a firm that has just begun to offer specialty services, you are probably safe in presuming that their high customer service standards apply to their new consulting.

Question #10: Should I check the consultant’s references before hiring?

Absolutely. The best way to obtain a reference is to ask the consultant for a name of a client with whom the consultant did a similar engagement as the one you’re doing. If you’re hiring a consultant to update your technologies, you wouldn’t ask for a reference in human resource systems to offer an observation.

  
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It’s a fact that we’re all living longer.

What is more amazing is to think that in the 18^th Century, the infant mortality rate was estimated at only 43 percent during the first three years of life. Today, according to the National Center for Health Statistics, men are expected to live until 76.9 years of age, while females might live, on the average, 79.5 years.

While living longer means you’re going to be around for a long time, it doesn’t guarantee quality of life. Putting illness aside, even the healthiest of human beings can’t live a modest lifestyle if money isn’t going very far. Will the dollar you earn today go as far as it does 10, 20 or even 30 years from today? Consider this: at a modest three percent inflation per year, the $50,000 you think you have to live on will be worth $48,500 next year, $36,871 in 10 years and just $27,189 in 20!

So, just how much does it take to retire, and can you retire early? You bet – with some careful planning and advice.

Annuity Payments vs. Lump Sum

Let’s assume you’re employed by an organization with whom you earn a regular paycheck. If self-employed, some of these observations may not apply, although the concepts still are just as meaningful. When you signed on with your company, you also signed something in your paperwork that asked, upon retirement, whether you wanted your accumulated pension all in one check or monthly payments. While many financial professionals’ opinions differ, there is a consensus that taking a lump sum is preferred should you need a great deal of money at one time. While annuity payments serve as regular, steady income, you could have a catastrophic need requiring a large up-front payment.

Ensure your pension plan deposits the lump sum directly into an IRA, or you’ll face a 20 percent withholding tax liability. And, if you do take the lump sum, make sure it does not cut off the company’s entire retirement plan benefits, including any health insurance.

If you opt for monthly payments, check out the options, such as taking higher payments now and having payments end upon death, or taking smaller payments now and having payments continue to your surviving spouse after your death.

We’ve always been told that you theoretically can’t touch any retirement monies until age 59 ½ without paying a 10 percent penalty plus tax. However, this isn’t true in all cases, because you can withdraw some of it upon disability or to pay certain medical expenses, and can even use it to buy a home or finance a family member’s education.

In addition, you can set up withdraws that function as annuity payments by using IRS Rule 72T. Committing to this program for a minimum of five years, the payments are based on life expectancy and total amount, but under the right circumstances, you actually could take regular sums of money, each month for five years, without incurring any penalty, as long as you committed to doing it regularly for five years. A tax liability would be incurred, but you would essentially have created your own annuity.

Social Security

Based on today’s Social Security, if you retire too early you’ll miss out on important benefits. Because Social Security payments are based on the average of your best 35 years of work (adjusted for inflation), if you retire too soon some of those years will be computed as zeros. For example, if you started working at age 22, you won’t have 35 years of earnings until you’re 57, so retiring early can displace average income. If you earned an annual average of $60,000 over your best 35 years, your benefit will be computed on that $60,000. If you only worked 30 years, and want to retire early, your benefit will be computed as the average of those 30 years at $60,000 plus another five years at $0, bringing your 35-year average down to just over $54,000.

Mortgage Considerations

Early retirees usually want to know whether to pay off the mortgage. Of course, any interest you pay on your mortgage is tax deductible at your regular income tax bracket, so it’s probably best to pay off auto loans or credit cards first. If there is enough money to still cover the payoff on the mortgage, compare the after-tax cost of the debt with how much you recoup on investments. For example if a portfolio averages an 11 percent return, and your mortgage interest is at eight percent before your tax deduction, it makes sense to leave the money in the market and continue paying the mortgage. However – one note. If you only have five years left on a 30-year note, most of your payment is applying to your principal, which means you have no deductible interest.

Other Thoughts

There may be hundreds if not more other considerations for retirement based on your lifestyle, income level and longevity. If you want to play golf 24/7, green fees can be exorbitant depending on where you play and which club you belong – which also carries a hefty fee.

What about car repairs or a new car to replace your 10-year-old clunker? Can you afford repairs or even monthly payments? How about where you intend to live … today’s chic retirement communities boast joiners’ fees that may be the same as your son or daughter’s last annual college tuition.

Many considerations … and many decisions. The best approach is to keep a level head, develop a retirement plan that touches on these observations and consult your accountant for his or her opinion. This is the right time to do it. Don’t wait until the end of the year. Meet – at the latest – in November to ensure you are taking advantage of all current-year tax saving and deductions. You can then put changes in place that will ease you into retirement – and may just enable you to retire years before your parents did. Now that’s an opportunity! Call us today to schedule an appointment to talk about what keeps you awake at night. We have solutions!

Backing Up is Hard to Do

Imagine tomorrow that you go to your office, and all the computers are there, but there is nothing on any of their hard drives. If that doesn't send a shiver down your spine, just keep reading.

A survey paid for by Iomega, makers of the popular Zip drive, shows that most people don't back up their data.

According to the survey, 41 percent of computer users do not personally back up their data. More than two-thirds (69 percent) of home computer users and nearly half (46 percent) of work computer users personally back up their data only once a month or less often, or they never back up their data

Iomega has a vested interest in selling Zip drives to back up your data, so the phrase "personally back up their data" gives me pause: most larger businesses rely on their Information Technology (IT) or Management Information Systems (MIS) department to back up data, regardless of where it lives.

But my gut tells me that they're not far off the mark in smaller companies where MIS/IT is the function of one person (office manager, tech guy, owner).

A Cautionary Tale
A well-run organization (about 30 employees) I know recently turned off their Microsoft Exchange 5.5 server (ironically, to upgrade the uninterruptible power supply for the server). When they turned it back on, the hard drive would not spin up. And, uh-oh: the backup doesn't want to restore. Off to DriveSavers (http://www.drivesavers.com) in Novato, California for their expert help in recovering "lost" hard drive data. Of course, that expertise comes at a price: $3,800 for a DVD containing the recovered data. A painful experience, without a doubt.

Now, you might ask, "What went wrong with their backup procedure? Shouldn't they just have been able to restore the system from their last backup?" To make a long story short, in the process of upgrading other system software, the backup process had stopped working some time back, although not in an obvious fashion. The missing link here was actually testing the recovery procedure on a regular basis.

Believe me, I know how scary it actually is to test your belief that something works (e.g. unplugging the UPS from the wall while the server is live). But would you rather find out when it's just a controlled test, or when it's absolutely critical that things work as advertised?

'Nuff said.

Regardless of how many computers your business owns, a "reasonably current" copy of mission-critical data (customer data, accounting files, ...) must be stored off site. Your definition of "reasonably current" may be daily, weekly, or monthly, depending on how often you add customers or close your books. The trade-off is the amount of data lost if catastrophe occurs.

If you have a single Windows computer and a decent network connection, you may want to consider using @Backup (http://www.atbackup.com/). For $99 a year, you can store up to 100 megabytes (MB) of data, with convenient, automatic nightly backup and other features (500 MB costs $299 annually). This may actually be a cost-effective solution for larger groups if it avoids the cost of additional personnel. Additional benefits include off-site backup (in case the building burns down) and accessibility from anywhere (in case you need that PowerPoint presentation on your office machine). But it does require Windows (95, 98, NT, or 2000) and a recent version of Internet Explorer or Netscape to operate. This may be a great answer for your home office.

The growing size of computer hard disks complicates the backup problem. For complete system backups, the only real alternative is tape. It's cost-effective and can be stored off-site. Tape comes in different formats (DAT, DLT, Exabyte, LTO, QIC, Travan, yikes!), but DAT (Digital Audio Tape) and DLT (Digital Linear Tape) are the ones you should consider. For reliability purposes, avoid QIC and Travan tape drives. CD-R, Zip drives, and diskettes are best suited to storing small groups of files.

In a small workgroup situation, the best answer is to have a central file server with a tape backup unit . If you have a bunch of computers, without a network, this is one of the best excuses to add networking to your office, along with a central file server. A file server does not have to be complex: devices such as the Quantum Snap! (http://www.quantum.com/Redirect/snap+main.htm) are easy to install. The shortcoming of the Snap! (which surprises me), is that it doesn't have any attached backup facility - you have to back it up to another machine over its network connection.

You can set things up so that users store their work on the server (make it the default file location in applications such as Microsoft Word). Alternatively, you can use the server to automatically back up remote PCs.

I suspect that most of my readers will turn to the individual or organization that maintains their computer and network infrastructure for help with their backup policy. In that case, here are the important things to ask:

• Is our backup procedure documented?
• Do we have an off-site backup? How current is it? Where is it stored?
• Is valuable data stored on individual user computers? If so, how is it backed up? Don't forget things like e-mail folders, documentation, contracts, contact lists, and calendar data.
• Who is responsible for making sure data is backed up? Are they aware of their responsibility and what it entails? Who covers when they're away?
• Have we tested our recovery procedure? Recently?
• How do I know that backup is taking place?
• How automatic is the backup process?

For those do-it-yourselfers, you may find these articles on a
painless backupstrategy (http://windows.about.com/library/  weekly/aa030200a.htm?once=true&) and a ten-tape backup method (http://www.ate.net/pages/tape_backup_strategy.htm) useful.

In my experience, the only backup procedure that works reliably from a human perspective is one that is completely automatic. Unless their primary job is being responsible for data integrity, most people just expect to show up at work each day with things as they were left the night before. One of the biggest shortcomings of the backup solutions included with Windows is that they cannot run unattended. Veritas Software's Backup Exec is a worthwhile alternative.

I strongly encourage you to institute either a reliable, automatic backup Yes, it costs money to set up, but that cost is minor compared to what you'll pay to recover or regenerate your data, and the business you'll lose because your systems are down.

And don't forget to test that it works. Just in case.

Understanding Financial Ratios

  
Our mission is to provide information and strategies to business owners and managers for improvement in the effectiveness of its business management so that key objectives can be realized.
 

Even the most business-savvy person is tempted to ask, “What does this mean?” when faced with rows of numbers stacked into pages of columns on financial statements. Fortunately, some quick ways exist to analyze financial statements and get an understanding of this data. Known as finan­cial ratios, these rules of thumb can help you:

• Benchmark operational standards against industry averages and your competitors;
• Analyze overall financial and operational health; and
• Predict the results of future operations.
• You can also use financial ratios to measure:
• Liquidity (ability to pay current bills);
• Activity (rates of inventory turnover and accounts receivable collection);
• Leverage (ability to borrow money and pay off debt); and
• Profitability (performance and efficiency at turning a profit).

In your analysis, you can choose from a vari­ety of financial ratios. Here are some of the most common.

Current Ratio

Equation: current assets ÷ current liabilities

What you can learn: How well a company is able to pay its bills — short-term solvency. It indicates the extent to which the claims of short-term creditors are covered by assets expected to be converted into cash in the near future.

Quick Ratio

Equation: (current assets – inventory) ÷ cur­rent liabilities

What you can learn: What percentage of assets can be quickly turned into cash. Inventories are typically the least liquid of a company’s current assets, and that makes them the assets on which losses are most likely to occur in the event of liquidation. Therefore, the quick ratio is a measure of the firm’s ability to pay off short-term obligations without relying on the sale of inventories.

Inventory Turnover

Equation: cost of goods sold ÷ average inventory

What you can learn: Frequency with which inventory is sold. The ratio depends on the industry and in some cases, even the time of year. Faster turnovers are generally viewed as a positive trend because they increase cash flow and reduce warehousing expense.

Debt to Equity

Equation: total liabilities ÷ net worth

What you can learn: Relationship of dollars creditors contribute (debt) to capital invested by owners (equity). This ratio indicates the degree of financial leverage that you are using to enhance your return. A rising ratio could mean that new debt should be restrained. Most investors feel safer investing in a well-capitalized company than in a highly leveraged business. A company is generally considered well-capitalized if the owners generally have a significant amount of their own funds at stake.

Return on Equity

Equation: net profit ÷ net worth

What you can learn: How well owner-supplied funds are being used to generate profits. The higher this number, the better. It shows what you have earned on your investment. The higher the ratio, the better the funds are being used to generate a good return on investment for shareholders and the greater the profit.

One Caveat

While benchmarking against other companies can be valuable, it also presents pitfalls. Comparing apples with oranges can distort results. Look out for differences such as:

• Accounting methods (for example, using the first-in, first-out instead of last-in, first-out inventory method leads to dif­ferent inventory and cost-of-sales figures on the income statement).
• Fiscal year-ends (especially important for seasonal companies).
• Methods of computing financial ratios (for example, before-tax basis vs. after-tax basis).

Who Else Uses Financial Ratios?

Business owners and managers aren’t the only ones who can benefit from looking at financial ratios. So can:

• Investors, to make informed and intelli­gent investment decisions.
• Corporate financiers, to spot potential takeover targets.
• Creditors, to evaluate business loan risks.
• Investment advisors and banks, to find prosperous companies that might need their services.

Take Advantage of Financial Ratios