Tag Archive: business_model

Why Reshoring May Be Good for Small Businesses

Wal-Mart attracted headlines earlier this year when it announced that the retail giant would spend $50 billion over a ten-year period sourcing and buying American-made goods. The goal is to help manufacturers bring production back to the U.S. from overseas—a movement known as “reshoring”.

In addition, Wal-Mart created a $10-million fund to promote American manufacturing, while also announcing that Kent International, a bike manufacturer and Wal-Mart supplier, planned to move its overseas operations from China to South Carolina, creating 175 American jobs.

Compare that to the experience of Core Products International Inc., a 26-year-old manufacturer of orthopedic soft goods and supports. In 2012, company president Philip Mattisondecided to close its 25-employee sewing and assembly facility in Mexico and bring production back to the company’s headquarters in Osceola, Wisconsin, home to 75 employees, and Chetek, Wisconsin, home to 25 employees.

The Wal-Mart decision attracted national headlines. Mattison’s decision barely made it to the local papers. Still, he says the decision to bring production back to the U.S. was the right financial move for his company. The increasing cost of offshore labor, combined with flat wages here at home since the recession, were part of the reason, he says. In addition, fuel costs have doubled, driving up freight costs in the process.

 

“We had also developed more processes and people to manage Mexican production,” says Mattison. “We often needed to send our staff to Mexico. They would travel there whenever we introduced a new item, added new equipment, or changed a process. That got expensive. It’s not nearly as effective to go offshore as some people think.”

That’s what Harry Moser emphasizes through the Reshoring Initiative, an organization he founded with the mission to bring good, well-paying manufacturing jobs back to the United States. Moser’s grandfather was a foreman and his father a manager at the Singer Sewing Machine Company factory in Elizabeth, New Jersey. Moser, who has 45 years experience in the manufacturing industry in a variety of capacities, also spent his summers working at the plant. But now, that plant is barren and Moser says “it brings tears to my eyes” to see that its production was sent overseas.

But times are changing and Moser has the numbers to prove it. In 2003, his data showed that over 150,000 American manufacturing jobs were lost per year to offshoring, while only 2,000 were gained from reshoring. In 2016, Moser’s data estimates that just 20,000 manufacturing jobs per year will be lost to offshoring, while 70,000 new jobs will be created in America because of reshoring.

To help companies of all sizes decide if reshoring makes financial sense, Moser helped create The Total Cost of Ownership Estimator, a user-friendly software program to walk owners through the process.

“When considering increasing transportation and fuel costs, increasing overseas wage rates, high reject rates, substandard quality issues and unreliable timelines and deliveries, plus a number of other hidden costs, the total cost of manufacturing in developing countries can be greater than most realize,” he says.

Patrick Van Den Bossche, a partner with A.T. Kearney, a leading global management consulting firm, says economic change and labor and currency issues have led to increasing costs in many developing countries, while energy and other costs have become more competitive in the U.S. Other factors, including the need for shorter delivery times and a renewed consumer interest in buying “Made in the USA” products, are making companies at least consider reshoring operations.

 

“There is a recent increase in cases mentioning the need to improve their image and/or brand by moving back to the U.S.,” says Van Den Bossche.

AT Kearney has a proprietary database of over 700 cases where companies reshored. Based on that database, the industries where reshoring is occurring the most include:

  1. Electrical/appliance
  2. Transportation equipment
  3. Apparel
  4. Computer/electronic
  5. Plastics & rubber
  6. Fabricated metal

 

Reshoring has its challenges

“Reshoring is certainly not a one-size-fits-all solution and executives should consider the specific characteristics and value proposition of their own business model to see if it fits them,” says Van Den Bossche.

And even if reshoring may fit a business model today, that may not be the case a few years down the road, he adds. In order to establish a successful strategy, business owners should first identify and understand the key drivers that will determine if reshoring will make sense in the future.

Using Moser’s Total Cost of Ownership Estimator is a good place to start. Being back in the United States is a good place to end, says Mattison, who added that closing down the Mexico plant didn’t come without costs. It took nearly three months to move all equipment back to the U.S., and every piece with a serial number had to get cleared through customs before it was sent back to Wisconsin.

“People don’t want to get out of their comfort zone,” says Mattison. “So it’s hard for them to see the benefit of reshoring. But in manufacturing you have to think long-term.”

In the meantime, his two American plants are able to produce the same amount of product at the same cost as when the company was manufacturing in Mexico, Mattison says. “Because of automation and the skilled American workforce, our operations in Mexico couldn’t come near the production capacity that we have in the U.S.,” adds Mattison. “It just made sense for us.”

7 investment principles for entrepreneurs

inc7 investment principles for entrepreneurs

by Karl Stark and Bill Stewart

 

7 investment principles for entrepreneurs. Those of us who have large investments in private businesses aren’t like typical savers. We need a different strategy for our personal investments.

 

Most personal finance experts tell a fairly consistent story about the need to build a diversified investment portfolio focused on long-term growth. But that type of investment strategy doesn’t necessarily apply to entrepreneurs and owners of private businesses, especially high-growth businesses.

We are a unique lot. Our concentrated investment in a risky but highly attractive company means that our overall investment portfolio is skewed differently than the average investor. One business owner once told us, “My business is my retirement strategy.” This perspective underscores the importance of building a plan that’s unique to your risk profile and your appetite for entrepreneurial opportunities. 7 investment principles for entrepreneurs

 

7 investment principles for entrepreneurs. Here are seven personal investment principles we have learned to keep in mind when your job is growing a business:

 

1. Build a “no touch” portfolio.

When you invest in stocks, bonds, and mutual funds, put them out of reach by creating “no touch” portfolios in accounts that you will never access. This will reduce the temptation to dip into long-term investments to address a short-term need for a cash infusion if your business is struggling. You can create more protection by loading up your retirement accounts and your kids’ education accounts. These are places where there is a huge financial penalty to accessing those funds, which will keep you honest. 7 investment principles for entrepreneurs

 

2. Protect your assets.

Structure your investments–and your company–so that creditors can’t reach your money if the business runs into financial or legal peril. In addition to structuring your business appropriately, this also involves transferring assets to spouses and children where possible and investing within retirement accounts and real estate, which in some cases are out of reach. 7 investment principles for entrepreneurs

3. Diversify away from your business.

Seek investments in your portfolio that are counter cyclical to your industry and business cycle. Investing in commodities may be risky in general, but if your business is heavily linked to the broader economy or public equity markets, a counter cyclical asset such as commodities may be attractive.

 

4. Invest more conservatively outside your business.

Most investment professionals recommend a heavy equity portfolio for younger professionals and a larger fixed-income portfolio for older individuals. Given that an entrepreneur’s business may largely cover her “equity risk,” she may be better off with a more conservative portfolio outside of her business. 7 investment principles for entrepreneurs

 

5. Build a cash cushion for future entrepreneurial ventures.

Most of us can’t pass up a good deal when it comes along. That’s why we became entrepreneurs in the first place. If you have the luxury of cash outflows from your business, put a sufficient amount aside so that you can keep some dry powder when new opportunities present themselves. 7 investment principles for entrepreneurs

 

6. Make smart business investments.

The best way to protect your personal finances is to ensure that your business has a sound, balanced approach to investing its capital. Our recent column on a growing business’s investment strategy discussed this in some detail. 7 investment principles for entrepreneurs

 

7. Build a great business model.

Of course, the best personal investment strategy may be your business itself. After all, your business can be your retirement strategy if it’s successful. Building your business should be what you do best. So focus your time and effort there and leave the investing to a professional. 7 investment principles for entrepreneurs

We should note that although we advise private investors on investing in growth companies, we aren’t investment advisers. We can share our own thoughts and experiences, but for more targeted advice you should seek a professional investment adviser. 7 investment principles for entrepreneurs

 

Article provided by Inc.com. © Inc.

7 Tips for Improving Your Sales Forecasting

7 Tips for Improving Your Sales Forecasting

Posted by Inc. in Advertising, Sales and Marketingon Nov 7, 2012 2:04:36 PM

by Tim Donnelly


Sales forecasts are by nature imperfect. But experts say there are ways to squeeze more value out of the projections you’re making.

 

Any good business will have a system of sales forecasting as part of its critical management strategy. But most sales forecasts are, by nature, inexact. The trick, experts say, is to know in which direction they’re wrong, and turn that into a picture of how your business is doing.

 

“People think the forecast is good or bad depending on how accurate it is,” says Tim Berry, president of Palo Alto Software, which creates business-planning software and is—despite its name—based in Eugene, Oregon. “What I think is it’s how well it breaks into meaningful assumptions you can look at later.”

 

For a small business—say, a restaurant—those assumptions could mean mapping activity in the dining room and keeping track of how many meals are sold at certain times of day. For a larger business, that could mean plotting all activity across departments to see how your products are matching up to industry standards. There’s a few ways to test the your sales forecasting to know whether you’re getting an accurate read or just dabbling in expensive soothsaying.

 

1. Use separate numbers. One of the biggest misconceptions about forecasting is that there’s one set of numbers that represents the “truth” for your business. In reality, multiple forecasts are necessary in order to represent the needs of different constituencies, says David Stephens, director of sales for Right90, a sales forecasting company based in Austin, which has done forecasting for Sharp and Bivo Networks.

 

Your sales team might have a forecast designed to meet its number, but product management is interested in the forecast of a specific product, operations is interested in finding out what it needs to produce and when, and finance needs revenue figures, he says. Someone at the top of the ladder needs to be prepared to put all those together and form a cohesive picture.

 

“Senior management requires the forecast be vetted from all perspectives in order to develop the confidence to make critical decisions,” he says.


2. Develop a flexible process. It’s impossible to use a single test that will ensure you can track the exact terms, time, and context of every sale. Instead, you should focus on developing a process that can be managed, reevaluated, and modified as conditions change, Stephens says.

 

“This requires discipline, beginning with ensuring that sales forecasts are updated on a regular basis,” he says. That means managers have to understand the sales system, customer history, product delivery, and even the history of the individual salesperson to assess with some certainty the forecast’s accuracy.

 

Big companies often make the mistake of thinking forecasting is just looking at the sales history and taking an average over time. Instead, they need to look at many additional factors as well, says Glen Margolis, president and CEO of Steelwedge Software, which is based in Pleasanton, California, and has forecasted for GE, DirectTV and Sara Lee.

 

3. Set aside time. Your forecasts won’t do you much good if you aren’t constantly keeping tabs on them. Berr says it’s crucial for companies to set aside a specific time every month (or however often you like) to review the forecasts.

 

Berry says his company does this every third Thursday of the month: managers bring in lunches, review the data together, and make any work on any high-level decisions that may be called for. It’s all part of the broader decision making of the company.

 

“If there’s a set time, everybody involved knows,” he says. “You look at, compare and plan for actual results…you start to see management happening.”

4. Use a consistent model. Margolis says he believes there’s no one model of forecasting that works best for every company. But one efficient method is sometimes one used by restaurant owners: matching this year’s sales to last year’s and making a guess for the future.

 

“That to me is the best model,” he says. “That empowers people who are actually running business.”

 

But the key is, whatever model is used—whether it is a weighted average over a few months or bare numbers-tracking—needs to be consistently applied over time.

 

“One of the biggest barriers is people saying ‘I’m not qualified to forecast, I didn’t take statistics,'” he says. “Well, I do have the degree, and I did take statistics, and still the educated guesses are what really drive the forecast.”

 

Consistent application of the same model standardizes the format, and makes it easier to review year after year.

 

5. Don’t get too complicated. Your business forecasting doesn’t have to be a hyper-complicated process that involves high-level mathematics and projections.

 

“Most businesses are not necessarily very sophisticated,” Margolis says. “They don’t have a team of statisticians. It’s someone with other day-to-day activities who also keeps an eye on forecasting.”

 

Stephens says simple, specific software and applications are available for sales forecasting that provide an audit trail, a history of the forecast, and the ability to align the data with customer relations management. The programs also allow you to note changes to any perspective such as product, territory, customer, or salesperson, he says—much more so than just keeping a spreadsheet on your laptop.

http://smallbusinessonlinecommunity.bankofamerica.com/community/growing-your-business/salesandmarketing/blog/2012/11/07/7-tips-for-improving-your-sales-forecasting