Geni:  After reading the tale of an ordinary restaurant that goes from sad to successful, what struck me was the connection between numbers and job satisfaction. We spend a lot of time helping our winery customers understand and apply numbers in achieving their goals, but I haven’t thought about the impact of those measurements on employee satisfaction. Maybe I haven’t been paying attention. We have seen tasting room employees blossom when they are able to make a direct connection between their individual actions and overall company objectives.  We have designed training sessions to help leaders work with their teams to create daily, weekly, and sometimes hourly goals. We have seen the resulting spike in sales and profitability when those goals and results are shared. But I’m not sure we’ve considered the positive impact measurements can have on employee morale.  What is that worth to an organization?  How does employee morale influence customer service?

People respond well to measurement – particularly when they have a clear objective and take a role in setting goals, creating measurements, and determining rewards. I’ve seen it work in the KPIs that we use for our firm. What are you measuring and how do you share those measures with your team?

Craig:  Geni makes a good observation about the impact employee morale can have on the success of any organization.  So often we focus on the tried and true numbers and overlook arguably the most important value — our employees’ perspective.  At the end of their day, does each employee know if they’ve been successful?  If not, it is impacting their performance and their attitude. Do your employees look forward to coming back tomorrow?  Imagine if every one of your employees had a positive response to that question.  How different would their interaction with your customers, fellow employees, vendors, and guests be?

Where there is smoke there is fire.  Proceed with caution.  Does this sound familiar?  We have seen an uptick in wine sales in 2010 when compared to 2009.  However, before we start celebrating, we need to dig deeper and understand what is happening.  When you begin to look further you will find that 2010 looks like the last half of 2008 when we saw the recession hit the industry hard. 

We are at a critical stage in the sales cycle.  The 4th quarter is a big test to see if wine sales will continue to grow.  The next two months for the wine industry are equivalent to  ”Black Friday” for retailers.  If distributors are feeling confident that consumers will continue to dine out, orders will happen.  If not, then we will stumble to the finish line. 

I have watched many of our financial instiutions get burned from poorly peforming loans.  As a business owner you have to be very careful in trying to get that next sale.  With the pressure on cash flows it can be tempting to keep pushing inventory out the door to distributors who are past due on prior sales.  I have heard rationale like “they have gotten behind before but eventually pay.”  This is a very dangerous mindset.  It is like taking the name of your business and putting the words “Bank of” in front it.  Remember what you’re good at…making wine, not being a lendor.  You can easily be taken advantage of by distributors.  The difference today is that you don’t know if that distributor who is behind on paying you is close to going under. 

This recession is like nothing any of us have ever experienced.  You cannot assume that the companies you do business with will be around tomorrow.  Caution is in order.  Big sales in the 4th quarter may look good on paper but if you cannot collect the receivables, your bank account will be permanently damaged.

Until next time…heed the smoke signals.  To avoid getting burned, don’t extend credit to those with past due invoices.

Wouldn’t it be great if there were some contrivance we could draw on to shore up our businesses in the face of an impending disaster? Who wouldn’t like some extra insulation to separate us from the murky waters of doubt that lap against our doors? We know to cover our windows with tape in the event of a hurricane – but what action do we take in the event of a reverse hockey stick on our revenue graph?

The answer can be found on your financial statements. The evidence of your financial preparedness is right there in plain sight.

It’s in the equity section of your balance sheet. Look at your retained earnings account. Smart businesses focus on growing their retained earnings over time. These accumulated (and undistributed) earnings represent emergency provisions that can sustain a business over the long haul. Bankers look at retained earnings for evidence that owners are willing to reinvest in their  business before they will extend credit.

Of course, your retained earnings may not be entirely liquid (and by “liquid” I mean accessible as cash, not drinkable).  Your earnings might be “retained” in the form of inventory, receivables from customers, or fixed assets, rather than cash, but they can eventually be converted to cash in the event of an emergency. So when you’re looking for comfort, look at your retained earnings. And if your balance is zero or below, you know where to focus once the storm has passed. A financial statement is a lot lighter than a sandbag.