Aquisitions, Lemons, and Cash Cows

Okay so if you did not know, I grew up on a farm. Not your typical farm, mind you. An open space where cattle graze free and the milk was as close to milk as it could get. That was long before milk started being manufactured in factories. And the cows have not complained since then. Oh, well. The cows don't really care. It's your life you are destroying. And plus, they will always be waiting for you to come to your senses.

my father had an obsession with buying cows. He had them all, mostly long-horned ones. "A cow's pride is found in its horns," my father used to say. So he acquired more cows. More cows with longer horns. Until one day it dawned on him. That raising cows was really not a business for him. It was a hobby.

A few days ago I was helping a friend of mine to structure his acquisition deal. I did not find out the truth until the end. He thinks of himself as a Moses of some sort. His mission is to save dying businesses. And with that, he has acquired more lemons than cash cows. Every time you enter into an aquisition negotiation with sentiments, you will end up picking up some long-horned lemons for yourself. Keep hobbies and business in sync. Notice I didn't say keep them separate.

Computer Tenants!! You are kidding, right?

I must start with a confession- I am not a computer geek. Except, of course a few rumblings on this blog which happen to be hosted by Google somewhere in the corners of one of their googlistic computers laying around an entire city somewhere. Talking about Google, you can't really talk about computers these days without saying "Google". Which brings me to my subject. Cloud computing. I started by telling you I am not a geek. I am an ordinary computer user who recently mounted up enough energy to buy a Mac so I can look cool. It did not work. I must confess that a PC could as well have served my purpose- or saved me the headache of switching between operating systems between home and work. Oh wait, I lost my trend of thought. Oh yes, now I remember. Cloud computing.

The first time I heard this phrase I was mesmerized. My friend, a self-proclaimed geek, was going on and on about the fact that sometime soon I may not need a computer anymore. I must confess that I thought he had lost his mind. What did he mean? Everyone says we have all become zombies glued to our screens. He went on to explain. And I listened. If you want to keep friends, your wife included, learn to listen. And listen I did. After all, he is my friend. He went on to explain the new world order of computers. A world of computing like I have never seen before. "Go on", I said. And go on he did.

"Cloud computing", he said, "is a form of computing where you do not need to own any physical infrastructure like servers, etc".

Now that sounded interesting. And being a frugal technology consumer that I am, anything that saves me one technology buck is worth my back. My friend went on.

"Today more and more businesses are avoiding huge capital hardware expenditure by renting computer space from third-party providers", my friend continued. To put it in perspective he gave me an illustration.

"A few years ago, if a company needed an ERP (enterprise resource planning) tool, or a CRM (customer relationship management) tool, they hired a savvy coder to build the entire thing from ground up or they went to some software lioness like IBM or Microsoft to provide a ready-made product. Either way, the cost of the product was in the neighborhood of hundreds of thousands of dollars. Today you can have the same product from salesforce or microsoft for a fraction of that amount. What has changed? The answer is very simple: Multiple tenants".

And with that he gave me another illustration:

"Suppose you owned a five-room house downtown portland and you wanted to rent it out. How much would you charge for rent?"
"About five thousand dollars a month", I said.
"You are right", he affirmed. "But suppose a group of five foreign exchange students wanted to rent the house and they wanted to share the costs, how much would you charge per room?"
"A thousand dollars per room. Wouldn't that add up to my five thousand dollars?"
"You are wrong", he lectured. "Why don't you try fifteen hundred dollars?"

That's profound, I thought. And thats how multiple tenancy works. One house for five thousand, one room for fifteen hundred. By renting the house in rooms, you actually end up making twenty five hundred dollars more than renting the entire house to one person. At the same time, the student who would not have afforded a whole house for five thousand now has a place to live for a fraction of the cost. How brilliant.

Welcome to the world of computer tenancy.

And forgive my typing errors because I am typing this on my phone while watching Jay Leno:)

Perspective

Perspective is key. For instance, if you were told that you would receive $1,000,000 for jumping out of a plane without a parachute, would you do it?

If you say "No," immediately, you would lose the opportunity for a million dollars. Why? Safety? No! Because you did not know the plane was on the ground with its emergency slide open, so you jumped -- but to the wrong conclusion.

How Many NOs Before a YES?

When I was growing up, my father (God rest his soul in peace) made it so clear to us that his NO meant NO and not MAYBE or LATER. Later when I started my first business peddling goodies at age 11, I brought this attitude to business. The first customer I approached made it so clear to me that he was not interested. I could almost hear my father screaming in my ears, “I said NO and I mean NO.” One day I decided to give myself a benefit of a doubt by returning to the same customer who had said NO to me. We were both surprised. After buying almost everything I had on me, my former rejection told me, “I have been looking for you everywhere. The moment you left, my wife convinced me that we needed your products. I tried to run after you but you had already gone too far. I am glad you came back.”

Since that time, it takes about four NOs for me to really believe someone is not interested.

Eliminating Options

Wouldn’t it be beautiful if we all could see the end from the beginning? Oh may be just have a glimpse of a few miles ahead of us? The good news is that we can. Though God has hidden the future from us, He has provided a way for us to form a framework within which we can eliminate options. Some call it vision. Others call it purpose. I call it eliminating nonsense. The mind is full of imaginations, dreams, wishes, and aspirations. The temptation to conquer the world can sometimes blind us from reality. Wishes take over reason and we find ourselves riding on the wings of the unattainable.

But what exactly does it mean to have a vision? Does it mean confinement to the finite or the elimination of chances? Certainly not. I call vision the trimming off of the unnecessary- the elimination of time wasters. The most difficult part of having a vision is eliminating options. Options have a way of enslaving us to indecision. Indecision breeds inactivity as we wait for the best alternative to jump out of the sea of options. We wait. And wait. Until it’s too late to choose.

If you forget everything, at least remember this: “ Eliminating options is half the task of crafting your vision for the future.”

Happy dreaming!

Increasing Your Business Profit

In difficult economic times such as the ones we are living in today, every business owner is scrambling for a nickel of profit here and there. The honest truth on the other side is that some businesses are not really as concerned about profit as they are about staying afloat. Every day as I drive around my neighborhood I am surprised to find out that some of my favorite stores are closing. The truth is, we are in challenging business times. On the other side of the truth is the fact that some businesses have managed to stay alive and they are picking up clients from the their defunct neighbors. How have these surviving businesses managed to stay afloat?

There are three ways to increase your business profit and each one of these comes with consequences. Before you decide which one you intend to utilize, you need to weigh the options and make sure you can sustain your profitability plans.

One of the ways to increase your bottom line is to reduce the weight at the bottom. And you do this by cutting business costs. Business costs come in different forms but we will talk about the three big boys: the cost of labor, the cost of inventory, and the cost marketing.

1. The cost of Labor: I am realizing that when it comes to cutting costs most businesses rush to the cost of labor. They start by either reducing the number of employees or reducing the number of hours for each employee. This is the most understood traditional way of cutting costs. In today's highly technological and outsourced world, this could look convenient. What most businesses do not realize is that the human touch is all there is to a business. Businesses without human beings are static and stale organizations without life. As convenient as cutting labor costs may be, it is not the first place a business should run to.

2. The cost of Inventory: Every business has inventory. Some argue that service industries do not have inventory. Much as this is true in theory, it is not true logically. Every business has some inventory of some kind. Cutting the cost of inventory means cutting profits from under your suppliers. What is going to happen here is that as more suppliers are forced to consider less and less prices for their products, they will either compromise their quality both of delivery and production, or they will go out of business altogether. To force your supplier to reduce costs is to step at the source of your stream.

3. The cost of Marketing: One of my clients came to me the other day and told me, "Amon, I do not have any more money to continue running my marketing program". What I actually heard him say was, "Amon, I am ready to die". Marketing is the life and blood of any business. No customers, no profit. In difficulties times such as the ones we are in right now, most businesses start to cut their marketing budget. The truth is, there are so many businesses closing their doors right now and customers are scrambling for their next favorite. Customers are left as orphans and they are looking around for someone to adopt them. This could be the best time to double your business-marketing budget.

How do you increase your profits without cutting your labor, inventory and marketing costs?

Email me at amonikas@yahoo.fr for some answers.