Business Strategy for Turning Lemons into Lemonade

Every economic climate has its gifts and its challenges.

The negatives - lower sales, decreased cash flow, and lower receivable and inventory turnover must be managed and monitored. Manage the challenges using tools such as appropriate credit policies, extended vendor terms, consistent and open communication with your bank, lowering margins where appropriate to maintain market share, and launching “can’t miss” new services or products. Monitor the challenges using tools such as cash flow projections, trailing 12 month KPIs (Key Performance Indicators), daily cash monitoring, weekly KPIs at the team and individual level, and relevant and timely internal financial statements.

Both management and monitoring are necessary. The biggest mistake I see small and mid-sized businesses make is their failure to monitor. When the going gets tough, the tendency is to make a knee-jerk reaction with blinders on, and then to wonder why the expected result was not achieved. My experience of monitoring is that it not only pays for itself, but it increases profitability, owner return and cash flow. If you do not have an effective monitoring program, our Shared CFO™ program is just the ticket to help you.

A) Identify what to monitor, based on your strategic objectives

B) Develop appropriate systems and procedures for tracking the success level of your management strategy.

The gifts of the recession take a bit more time to discover. And it takes strategic thinking to develop an action plan to take advantage of the gifts.

Let’s take a look at a few of the biggest gifts of the recession.First is the opportunity to upgrade your team. Good people are the life blood of any business. And over the last several years, recruiting good people has been a challenge. In many cases, even finding someone to work was difficult. The search and expectation for an excellent candidate was often reduced to searching for an adequate candidate. With unemployment rates up and rising, now is the time to assess weak team members, free them up to find a new path, and move your company ahead with a re-energized top-tier team. Jim Collins, in his landmark book Good to Great, calls it “getting the right people on the bus.”

Second, look at the opportunity to lock in lease rates at rock bottom prices. Or if you have the capital and cash flow, look for your own building. Real estate is being offered at record low prices, and you can use this to gain a competitive advantage for years to come.

Third, if you are adequately capitalized, you should be able to find financing for projects over the next six to twelve months. The exception appears to be speculative real estate where credit markets are all but dried up. Now is the time to assess your fixed asset needs and to take advantage of rock bottom prices, extended terms and to lock in favorable long term interest rates.Finally, upgrade your technology. Buyers are in short supply everywhere, so if you have the cash flow to support a technology upgrade, software or hardware, now is a good time to consider it.

If you don’t have the funds now, but know you need to upgrade, use this time to assess your needs, sort through your options and get your decision in hand so you are ready to buy when cash flow eases.

Now is the time to be strategic, and to build your foundation for the recovery.
Our Shared CFO™ program offers an affordable, variable cost solution to managing and monitoring recessionary challenges, as well as taking advantage of the strategic opportunities.

May prosperity be yours,

Mackey McNeill, CPA/PFS
President and CEO

Mackey Advisors

www.CultivatingProsperity.com

The Right Thing is Often the Hardest Thing

It has been a great couple of months for us in the investment business. Some time had passed since we could talk about increases in account values and had clients eager to put more money in the market. While this is great for business, the actual change of pace holds a much greater meaning.

Since late 2007, the changes people have felt in their wallets and investment accounts parallel the changes in their psyche. Constant horrific economic news, political uncertainty, and continually dropping portfolio values moved many people to a place where their actions became as erratic as the stock market. Consider the ramifications of this one simple question asked by many investors:

“Since my cash flow is so tight, why should I continue to contribute to my 401(k) in these challenging times?”

1) Consider that each dollar not put into a pre-tax retirement plan is subject to federal and state taxes. A dollar saved in a retirement plan is a dollar earned, a dollar saved outside a retirement plan may only be 80, or even 60 cents earned depending on your income level. I’d rather take my chances with the market than lose 20% to Uncle Sam right from the start.

2) Many companies out there are still contributing some kind of match toward their employees’ retirement savings. Often this is done dollar per dollar up to some level. Let me be clear here, “THAT IS A 100% IMMEDIATE RETURN ON YOUR DOLLAR!” You can even afford to have a little credit card debt if your contributions are being matched. Put in at least up to the matching threshold, where the market can take 50% and still leave you with what you started with.

3) When we have recessions, stocks go down. When we have expansions, stocks go up. This is the perfect time to invest, you are buying low so you can eventually sell high. When news of the recession ending leaks, so does the return potential. Get in early and your bravery to test the tepid waters is likely to be rewarded.

Having a grounded financial plan and investment strategy will help answer the question above. Emotional decisions are often made with haste and are not always the most pertinent. When a map has been drawn, it is quicker and easier to find a destination. This also stands true for our financial wellbeing. By sticking to the plan and monitoring the success of lives, not investment accounts, people are weathering this turn down by buying low and saving more. The reward of this will ultimately be reaped in the future.

Our goal at Mackey Advisors™ is to position our clients to have an incredible life regardless of their asset level. It has been demonstrated that stock markets are not a must have for prosperity and happiness. Although it sure is nice to see signs of life in the market once more.

by Andy Pulsfort

More savings tips

I was asked today to contribute to a press release by the AICPA on savings tips. Here was my laundry list:

• Barter time - for example, work with your neighbor to redo his kitchen and have him work with you to plant your garden or swap baby sitting for sewing. Discover a talent you have to share and find someone that has a talent you need.
• Participate in recycling by shopping at goodwill - especially on 1/2 price day. You can get a pair of jeans for $2, and you can dress your kids for a season for $20.
• Plant a garden, either by starting plants from seeds or buying starts.
• Buy local food, in season, and can, freeze or dry it for later. Make your own food dryer with screen and the sun or buy one off Craig's list or in a resale shop. This winter your soup will be amazing.
• Invite your kids to participate in things you normally would pay for like washing the car, going out for pizza (make your own at home), doing your nails, etc. Put 1/2 the savings in your savings account and 1/2 in a fun account for the family- let the family choose where to spend the money.
• Create a social network by inviting a group of friends to a game night once a month. Make it a potluck. You will have more fun than going out to dinner and save money too.
• Eliminate the lawn fertilizer/pesticide service. Not only will your kids and pets be safer, your lawn will come alive again, and you'll contribute to improving the ground water (and the drinking water) in your area.

May prosperity be yours,

Mackey McNeill, CPA/PFS

President and CEO

Mackey Advisors

www.CultivatingProsperity.com

The Power of Peers

Last week I was blessed to spend the day in a study group of CPA's that specialize in financial planning. The AICPA (American Institute of Certified Public Accountants) began the group to offer CPA's an opportunity to share best practices and learn from each other.

The take aways were amazing, as many shared their varied gifts, talents and insights.

We live in a time when information is free and available with the touch of a key stroke. Wisdom is another matter. Wisdom is the application of knowledge and experience with common sense and insight. I am delighted and blessed to be in a group full of wisdom, readily available and freely shared.

Are you saving enough?

The solution to learning to save it to set yourself up for success. Start small, and make it fun. I discussed these ideas recently in an interview with Andrea Coombes of MarketWatch.

Scroll about ½ way down the page.

click here to read the story and watch the video

Mackey McNeill, CPA, PFS, IAR
CEO/President

Mackey Advisors
525 West Fifth Street
Suite 318
Covington, KY 41011
P 859-331-7755
F 859-331-4695
CultivatingProsperity.com