Why Business Owners Shouldn't Cold Call

by John Dini, President MPN Incorporated

The Owner as Salesperson

If your business employs salespeople, then you’ve probably had them bring an account challenge to you. “You need to talk to this customer, Boss. You can (fill in the blank) better than anyone else.”

The fill-in-the-blank part may be convincing, explaining your product, negotiating or being tough. Whatever is needed, it’s likely that your employees think you do it better than they do. In most small businesses, the owner is the best salesperson. Why is that?

In some companies it’s because the owner started out as a salesperson and built the business that way. But that isn’t true in all cases. Even in situations where the owner is the best technician, the best analyst, or the best designer, he or she is usually still the best salesperson.

That’s because owners have gravitas, the weight of ownership attached to their words. If they promise something, the customer freely (and correctly) assumes that such promises carry the reputation and resources of the company behind them. If the owner says something can’t or won’t be done, there is no court of appeal. The owner’s word is final.

The owner is usually better able to reach an understanding, because the party negotiating for the other side is more accepting of the owner’s positions. There are fewer things to negotiate, and more acceptance of the facts as presented.

So why do owners hate cold calling? I mean, everyone dislikes cold calling, but all the business owners I know hate it with a passion. Even those who grew their business with cold calls (and most did) steadfastly refuse to do it today. What makes it so loathsome?

The Owner’s Sales Identity

The issue lies with the owner’s ego. I don’t mean an ego that says “I’m too good to do this,” but rather the entire sense of self-worth that drives your personality.

When you started out, you didn’t expect new customers to take you at your word. After all, your business had no track record, so why should a stranger believe you when you promised something? You probably weren’t too certain that you could actually deliver everything you promised. But as the business grew, you established your reputation for quality, dependability, integrity, and any other feature you take pride in. You carry that reputation with you as an owner. It is part of you.

It comes along whenever an employee introduces you to a customer. There is always a little bit of pride in hearing “This is my Boss.” or “This is the Owner of our company.” or “This is the President of ABC Corp.” It’s a position you earned- no one bestowed it upon you. It is part of you, of your gravitas.

All of that disappears when you make a cold call. To begin with, you are probably trying to make an entry through a gatekeeper who doesn’t know your company, and doesn’t care what you have to offer. His or her job is to deal with people like you, so that the real decision maker doesn’t have to.

Further, your aura of ownership is left at the door. Your words carry no more weight than anyone else’s. For all they know, you’re just another lyin’ salesman. It’s hard not to respond to their skepticism with “Do you know who I am? Do you understand the commitment that stands behind what I say?” They don’t, and they won’t.

Negotiation Strategy- Matching Levels

The underlying problem with owners making cold calls isn’t that they are uncomfortable. No one likes making cold calls. It’s not that they result in rejection that bruises the owner’s inflated sense of self, either. It’s that they aren’t an appropriate use of an owner’s time.

A basic tactic of negotiation strategy is that you match levels of negotiators. If their final decision maker isn’t in the room, your final decision maker shouldn’t be there either. Negotiations (and all sales are negotiations) can only take place between equals.

So it is appropriate for someone else to make the cold call. Teach them that it is their job to only put you in front of your opposite number- someone with the same ability to commit as you have. Then the work you put in to earn your stripes brings value into the room with you.

What do you think? Do you still cold call? How do you set up your gravitas before a meeting? Let me know.

It Does Not Have to be Lonely at the Top (in fact it shouldn't be!)

Today's post is written by Bob Dodge, Sr. Partner at The Alternative Board - Denver West.

As a business owner, you have no doubt experienced how lonely it can be at the Top. It doesn’t have to be lonely, though. Even the Lone Ranger had Tonto to talk with. You don’t have to go it alone; in fact, there are several reasons you should involve (listen to) others.

Talk with your employees to find out:

1. if they understand why you expect them to complete critical tasks. If they are not motivated, no amount of training will help! The must have the desire to do so.
   
   
2. if they have the capabilities (time, tools, skills and resources) to accomplish what is needed for the organization. Telling your team to “just do it” if they lack these capabilities will only frustrate them, and eventually you. You and your entire team will benefit from discussing your vision and priorities; providing opportunities for employees to learn. Demonstrate to your employees through your actions that you are committed to these critical success factors.
   
   
3. if they know the consequences of their actions or lack thereof. If employees don’t understand what is in it “for them”, they’ll never perform. Be prepared to provide those (positive as well as negative) consequences to avoid problems down the road. In short, walk the talk.
   
   As a result, you might hear some great ideas to improve the business! After all, they are the ones actually doing the work!
   
   

Talk with your customer to jointly consider how they experience your product or service:

1. Maybe there are additional services you might provide that customers would value (and pay for). These are opportunities to capture additional revenue.
   
   
2. You might discover that your company is currently spending time, money or other resources on activities and features that your customers don’t value.
   
   At least they’ll appreciate the gesture to at least look at the business relationship from their perspective.
   

Talk with your peers:

You might be surprised that other leaders face similar challenges as you. Regular conversations with these executives provide a safe way to explore ideas and learn from one another.


Talk with your coach:

Consider getting a coach to help you explore and accomplish taking your business to a new level. A good coach will help you listen to yourself!

These examples of communicating are all actually acts of listening. Most business leaders can and do inform, motivate, sell, and convince. Effective leaders have also mastered listening! How could listening to your employees, customers, peers or coach affect your business? Would you feel like less of a Lone Ranger?

What is Motivation?

The art of motivating people starts with learning how to influence individuals' behavior. Once you understand this, you are more likely to gain the results that both the organization and its employees want.

Motivation is the will to act. It was once assumed that motivation had to be injected from outside, but it is now understood that everyone is motivated by several differing forces. Int he workplace, see to influence your staff to align their own motivation with the needs of the organization.

To release the full potential of employees, organization are rapidly moving away from "command and control" and towards "advise and consent" as ways of motivating. This change of attitude began when employers recognized that regarding good work is more effective than threatening punitive measures for bad work.

Self-motivation is long lasting. Inspire self-motivated staff further by trusting them to work on their own initiatives and encouraging them to take responsibility for entire tasks. For demotivated staff members, find out what would motivate them, and implement whatever help you can. Highly motivated individuals are vital to supply organizations with the new initiatives that are necessary in the competitive business world.

Who do you need to motivate? Yourself, managers, colleagues, and subordinates. Each are motivated in their own way. If you want a detailed assessment of what motivates your people click here or send an email to blair@tabdenverwest.com.

Your persuasion and influence can be used to motivate yourself and others. Just remember, true motivation has to come from within.

Help Great People Do Great Things

Last week at the Association for Corporate Growth (ACG) Denver luncheon, the keynote speaker was Jerre Stead, President and CEO of IHS. IHS is closing in on $1 Billion in revenue. Since 2005 the company has made 33 acquisitions. Since completing its IPO in 2005, the company revenues have more than doubled and EBITDA has grown about fourfold. SUffice to say, their performance over the past few years is worth noting.

Jerre Stead's message to the audience was straightforward - The Role of the CEO is to "Help Great People do Great Things." He then described five principles that he uses to operate IHS.

1. People are the only sustainable competitive advantage
   Treat them all with equal dignity and respect. There are no "perks" for anyone at IHS.
   
   
2. 100% trust of every person in the company
   At one point, Stead ordered the detailed IHS policy manuals (with hundreds and hundreds of policies) be shredded. "Do we need guidelines? Absolutely! But, if you let people use their best judgment, you never know how great they can be."
   
   
3. Invest in training and development
   "If I had an extra dollar, I'd spend it on training and development." It's the best investment you can make and its the surest way to reduce involuntary turnover.
   
   
4. Facts are our friends
   
   • Not masses of information, but "actionable facts".
   • "Give me three important facts that will help me make a decision."
   • One of Steads comments was that all proposed decisions at IHS require the generation of a "one-pager." On the one-pager is the summary of the proposal, what decision you are looking for and "three facts that will help me make the decision."
   • You can always ask for more detail, but get the key facts and help me make the decision.
   • You never have enough facts, but if you wait to make the decision until you have all the facts, it typically is too late.
     
     
5. Have an intense internal and external intellectual curiosity about customers
   All senior meetings start with some interaction about customers.
   
   
6. Reward ... Reward ... Reward ...
   HE said there were five principles, but he added a sixth very important one. Remember to reward employees continually for company success.
   

Share your thoughts on Jerre Stead's key principles.

Technology Isn't Everything

We all love our technology – email, social media, our websites and our PDAs. Technology is a great productivity tool and most of us have a hard time imaging life without electronic communications. However, there was a time, not too long ago, when we didn’t have email, laptops, smart phones, etc. As business leaders, we need to be able to leverage technology but maintain relationships.

Business owners will often say that people are their greatest assets. But in fact, their people are PEOPLE. And no amount of technology can replace human interaction. I am seeing too many business leaders using electronic communications as their primary way of communicating, in some cases it is their only form of communication. When is the last time that you dealt with an employee or vendor issue by issuing a tense email rather than having a meeting or picking up the phone and have a conversation?

Yes, it is easy to hit the send key at any hour of any day from anywhere. But there are times when in-person human interaction where you can see body language or at least hear voice tones. All too often, the tone we mean to send in an electronic communication is interpreted very differently by the receiving party.

I know of a business owner’s employee who received a very terse email from the owner. The employee was upset; the owner wasn’t clear in their communication and didn’t bother to talk to the employee before sending the email. The employee, who previously had been a high producing employee, suddenly went to “average” according to the owner. After having conversations with them, the employee felt that it wasn’t worth the extra effort to go above and beyond if the owner was just going to hide behind email and send messages without getting all of the facts because they wanted to deal with an issue quickly and easily.

We are a social species and thrive on interaction with others. The work environment is no different, our employees, vendors/suppliers, partners, etc. are great assets but more importantly they are human. To be a great leader you need to develop relationships, not just electronic communications. Technology should be used to enhance and improve the relationship, not take the place of 1-1 communications. I love my Blackberry and other forms of electronic media but email, tweets, Facebook messages and the like are not a replacement for in-person meetings or an old fashioned phone call!

The Frustrations of Hiring

My Executive Assistant moved on to help run the business she and her husband bought so now I am back-filling the position. While, I have said that there are many opportunities to hire great talent right now, you also have to be careful in this process.

First, smart business owners are keeping their top talent, regardless of their business situation. Good talent is hard to find and harder to replace. There comes a point where if you let go of too many employees you do more harm to your business than good. So with that said, regardless of the position you are hiring for, keep in mind that there are a lot of people out there who were the bottom 20% in their previous organizations.

Second, some people are so desperate for a job that they are responding to almost any job posting and not even reading about the position. I have received people’s resumes with standard a standard introduction and/or cover letter that talks about things that are not relevant at all to the position. If they had read the job posting, they would have known this.

Third, the devil is in the details. Call me picky but when someone is trying to get hired, I expect them to send something where the grammar, spelling, etc. is correct. Since they should be doing everything possible to impress the hiring manager, well you get the point. The number of responses that I received with typos, grammatical errors, etc. was astounding, even for me.

So what does this mean? Well, patience is a virtue. I confess that on more than one occasion as I was slogging through the resumes I just wanted to forget the whole thing. There were certainly other things that I would rather be spending my time on (like getting some work done). There are still gems out in the rough. You just have to invest the time to find them. And of course, for the most part, you can find quality talent at reasonable rates which is a good thing.

If you have an opportunity to hire – go for it! Just make sure you write your job description and key accountabilities BEFORE you post the position. Also, make sure you ask your employees for referrals as they are usually a great source for quality hires. Your job posting should be as clear as possible in terms of what you are looking for. If people don’t read the post you will know it immediately and can easily reject that resume. I would say, have fun, but I know better. To motivate yourself, think about all the great value your new hire will bring to your organization and how they will allow you to go focus on the strategic items necessary to move your business forward. Happy hunting.

Wanted: Overqualified Professionals

How to manage expectations and integrate advantageous hires.

By: David Lewis

Is it over yet? Are we finally on the road to recovery? When will business be back to normal? In today’s business world we’re all asking these questions. The harsh reality is that what we considered “normal” is probably a long way from returning, if it ever returns completely. However, there are many opportunities for business owners, especially in the area of staffing. What makes hiring different today is the deep pool of talent that exists due to the recession. What is even more remarkable is the fact that these potential new employees come to the table with skills that far exceed what would fall into the salary range for the position they are interviewing for. So what’s the problem? There are several. The recession has delivered a huge challenge in the area of workforce management: how to hire top available talent who will work for less than your current staff without creating total havoc among your employees. How, for example, do you bring in Bob, a 15-year marketing veteran who happily will take the marketing coordinator position, yet has more experience than the person to whom he reports? On the one hand, you may want to avoid creating such a conflict; but on the other hand, you want to hire the best available talent in order to best benefit your business. If you handle this correctly, it can be one of those “good problems.” If you don’t, you are going to regret the decision. There are ways to ease into this type of situation tactfully and strategically. Ask the Right Questions Before you conduct the interview, determine how satisfied the candidates will be in a lesser role. You can do so by looking through their resume for signs they have successfully transitioned into roles with lower stature or lesser levels of responsibility. In the interview itself, your line of questioning needs to focus on their past behavior when it has come to handling the work of those below them. For example, have they stepped in regularly to assist their staff when the workload required? Can they show they have remained very much a “player/coach,” serving as a leader and a doer? Many candidates will tell you—as tactfully as they can—that they really have no other choice, and therefore are willing to accept what the market will bear. In the past, we may have eliminated candidates who were “overqualified” in part because we thought that they would leave the company as soon as they found a more suitable position. However, because so many companies have consolidated or disappeared, professionals in all areas of business are oversupplied and under-demanded. That means that bringing on board overqualified new hires does not present anywhere close to the flight risk we have reasonably been concerned about in the past. If you are still concerned that they might not be around for the long term – consider asking them about the other positions they have interviewed for, paying close attention to the level of those roles. If they are similar to the position you are hiring for, that could validate their claim. Integrating New Staff Once the new staff member is on board, it’s important to pay close attention to the dynamic between old and new. Your current staff could easily see the new hire as a threat. It’s therefore critical that you take a proactive approach with all parties. For the new hire, be sure they have a realistic set of expectations when it comes to their role, as well as current and future compensation. Tell them what you expect in terms of their performance and interactions with coworkers, providing direction and guidance on how you want them to “manage up” to those that hold more senior roles, yet have less experience. You want to tell your tenured staff that you continue to value them and their contributions. That being said, you also want to encourage them to solicit ideas and input from the new staff member, and to not view what they offer as threatening, but rather hugely valuable. By taking these steps, you can create a level of constructive competition that raises the level of performance of junior employees who have more tenure than the more experienced new hire. Look for ways to tap ideas and contributions in group settings, while reinforcing the hierarchy that exists in your organization. Future with Your Company Over time, these new hires will most likely expect growth within your company. Just because they are willing to get started at a lower level doesn’t mean they will be satisfied to stay there. Before taking on experienced people, you should decide if you can handle feeding the success of your business at the expense of losing the resources that got you to this point, or if you see enough growth on the horizon to allow parallel career trajectories. If your loyalties are to those that have been with you the longest, then it may mean that your future success could suffer. When the environment you create by hiring today’s available talent is not managed and monitored carefully, morale and loyalty across the board can decline. Keeping a close watch and injecting yourself as needed should allow for growing your capabilities to new unexpected levels, while getting even more out of those that have been with you to this point.

The Triple Threat: Phase II

The following post was written by my friend and colleague John Dini in San Antonio, TX. It is very thought provoking. Let me know what you think. Enjoy.
___________________________________________________________________________________
I am by nature a relationship-oriented person. I like people, and I want them to like me. I’ve been watching my clients struggle with this economy for what seems like forever. They all desperately want this damn recession to end, and so do I.

I don’t like to be the bearer of bad news, but I don’t think most of us are going to be very thrilled with 2010. My January posting on Planning for the Strategic Triple Threat was discussed by hundreds of business owners in The Alternative Board® around the country, and re-posted in places that eventually came back to me from surprisingly far afield. We are now entering Phase 2 of the triple threat, the slow recovery.

Last week I attended a presentation by John V. Duca PhD, Vice President of the Dallas Federal Reserve Bank, and another by Joseph Stiglitz PhD, the author and Nobel winning economist. Neither one said anything that I hadn’t already read or figured out, but nothing in either speech made me very happy.

1. What Underlies the “Recovery?”

I am going to be succinct in delivering the facts. Some are from the lectures and others from my own research. They speak for themselves.

Economic growth is projected to be positive again in the third quarter, by a fraction of a percent. This would mark the “end” of the recession.

Bank lending spreads are at 1930’s levels. (Any of my clients who have gotten their credit lines renewed in the last 6 months will attest to that.)

Unemployment is at 9.8% of the working population. The U-6 measure of unemployment, which includes those who have given up looking and who are employed part-time but still seeking a full time job, is at 17%.

Bank failures in 2009 are right at 100. That will probably double in 2010.

The household savings rate spiked to almost 7% in May, and continues in the mid 4% range, even against strong equity indices.

The total number of home mortgages that have been refinanced or principle-adjusted through government relief programs in the last 2 years is less than the average month’s new foreclosures.

Except for non-conforming jumbo mortgages, the US Treasury, via Freddie-Mac, Fannie-Mae or FHA, is currently underwriting 100% of the homes sold in the US.

Commercial property mortgages on bank’s balance sheets are still exempt from mark to market, disguising the real state of those banks for the moment.

The FDIC is bankrupt

$400 billion of the $800 billion stimulus will disappear without a trace

Asia has emerged from the recession. South America barely felt it. Neither is waiting for us to start spending again to move forward with their economic plans. Enjoy the Olympics in Rio de Janeiro.

The G-20 meeting in Pittsburgh tacitly accepted the need to move to a new world reserve currency from the US Dollar. Only the refusal of the host country to place it on the agenda kept it from being the major topic.

We have tripled our current deficit, which we are funding by “printing” money.

I don’t want to hold back, so I’ll toss in a couple more things that are more observation than fact, and then move to a discussion of what we should be doing.

Our government is currently focused on health care reform. Regardless of what you think about the programs or proposals, two things are plain. One, “budget neutrality” however that is defined, will come only at a substantial increase in the costs of employment. Second, it will not include the looming explosion in Baby Boomer Medicare, which predates the “reform” and is therefore not included in the calculations.

Both of the speakers, when asked about different events in the future, had disturbingly identical responses. “I can’t say. We are in uncharted territory.”

The Domino theory in Vietnam was a crock, but right now we have so many things falling on each other that the metaphor seems appropriate.

2. What does it mean?

Let’s look at the above facts in light of their effect on our businesses.

Economic growth and unemployment
The projections I’ve seen are for slow growth. Some say we will have a double dip recession: two quarters of replenishing inventories and the supply chain, followed by another slowing. That is the “W” shaped graph scenario.

Others say the recovery will be a “U.” Still others say an “upside down square root sign” meaning a long flat period. No one, absolutely no one, says we will have a “V” shaped recovery such as in the 90’s and 2002.

So growth will be slow, likely in the 1% to 1.5% range. Some, like Stiglitz, say we will face “3 to 5 years of Japanese style malaise.”

Employee productivity increases by an average 2.2% annually. It has been much greater with the layoffs and through the introduction of the PC, but 2.2% is the long term average. We are still adding about 1% to the working population annually; although that may rise due to delayed retirement by Boomers who have seen their savings shrink.

So we need around a 3.5% growth rate in GDP to absorb productivity increases and new entrants before we start shrinking the unemployment rolls. No one is predicting 3.5% growth in the next couple of years. In addition, we have to return all the employees on short hours or short pay before we hire anyone. Look for unemployment to stay this way for some time.

Consumer spending
As I pointed out in January, the explosion of credit led to a huge overbuilding of commercial space. More on that later, but the savings rate of all Americans has jumped from a negative 2% to about 5%. With consumer spending at 70% of the pre-recession GDP, that put almost 5% of the national economy out of circulation.

I learned a new term this week; “the paradox of thrift.” The more people save, the worse the economy becomes, and so the more people save. Add to that the 17% that can’t save because they don’t have enough for expenses already, and the consumer driven economy looks pretty grim.

The rising stock markets have pulled some of that money away from savings. I admit to not being clear on exactly how that’s figured. I think retirement account investment is savings, but direct investments are not, but I’m not sure. Either way, if we get a bump in interest rates and a slip in the markets, just watch how that savings rate spikes again. No one wants to be caught like they were last October.

Banking and Commercial Lending
It’s a good time to be a conservative, solvent banker with an underpinning of consumer deposits. You are borrowing from the Fed at essentially zero, and lending it out at the best spread you’ve ever seen.

The truth is, you need to make a lot of money because the FDIC just asked you to pay the next few years of your vastly higher deposit insurance premiums in advance. Ouch! The FDIC reserves didn’t even make it through a year of this mess. What happens when the next year is worse, and the FDIC has already borrowed through 2013? I’m betting on more special assessments, putting greater upward pressure on rate spreads. That slows business even more.

It could be worse. You could be one of the many (some say a majority) of banks whose balance sheets depend on commercial real estate mortgages. Office buildings and strip centers have low occupancy, and many of the rents are at discount. Here’s what that would normally do.

As a banker, I value your building by its income stream, or capital return rate. If you are projected to generate $100K in rents at say, 85% occupancy, and I expect a 10% cap rate, then I would value your building at $1,000,000. You put in $200,000 (20%) and I will lend you the other $800,000.

At the end of 2009 I look at your results, and find that you were only 70% occupied, and did some discounting, so that rents actually came in at $62K. Now your building is worth $620,000 by my calculations.

So I reset the value on my books, look at your remaining mortgage balance of $775,000, and nicely ask you to come down to the office with a check for $155,000 to make up the difference. That’s if I don’t ask you to bring $279,000 so I have an 80% loan-to-value ratio again.

What? You don’t have $155,000 (or $279,000) because your rents were down? No problem! Since TARP I no longer have to “mark to market” on my assets. So I can roll your financing for $775,000 on a $620,000 building because I judge, in my expert opinion, that over the life of the loan the asset will someday be worth as much as I have it on my books for. Neat, huh?

As Dr. Stiglitz said, there is seldom a good reason for markets with poor transparency to become even less transparent. Many banks will do this until their balance sheet becomes so unrealistic that they fold even though they are technically solvent under the current rules; thereby increasing the pressure on the FDIC.

Finance
By now, you are probably asking the same question millions of Americans have voiced, which is “Why don’t the regulators do something about this?”

Short answer: Because there are 5 (count ‘em, five) financial industry lobbyists in Washington DC for every Congressman.

Longer answer: Because our national legislature has lost any appetite for regulating the markets, (which just might be related to the short answer.) They will hold hearings on Merrill Lynch bonuses, slap a few people around, and move on.

Everyone (except those of us who are paying for it) is pretty comfortable with the current system. People in the financial industry get paid huge sums to take big risks with other people’s money. If they succeed, their huge paychecks get even huger. If they fail, we socialize the losses. That means everyone shares.

The institutions that were deemed “too big to fail” were merged, so they became even bigger. Now they are “too big to fix.” Where we used to let them crash, wiping out the debt holders and shareholders, now we “have to” save the mutual funds and union retirement funds, so we pay everyone off with tax dollars. Actually, we are paying it with your children’s tax dollars.

If you were proud of not being one of the spendthrifts, of not running up your credit cards, of not hocking your house to buy big screen TVs, I have news. Your government decided to do it for you.

The Deficit
My mom says “I know things are bad, but I live on Social Security and a few CDs. None of this really will affect me.”

Perhaps, but it really affects us all. The deficit makes us less credit worthy as a country. A recent issue of The Economist compared the US Federal Reserve Bank’s balance sheet to the Bank of Zimbabwe. Isn’t that comforting?

Maybe we’ll start getting emails from Fed employees, offering to transfer millions in frozen accounts if we just give them our bank account number. Oh… they already have our bank account numbers. Never mind.

The “Third World” is rapidly gaining. China has pretty much blown us out of Africa, as business goes. They are passing us in trade with Brazil, and the rest of South America is following. Their economy will grow at 6-7% this year, and that was in a recession. The developing world just passed the USA in total trading volume with China. We are now their second best market, and Europe is catching up fast.

China, Japan and the Middle East are acutely aware that they hold trillions of dollars in US debt; and that we are printing money to devalue our currency through inflation, making that debt worth less to them every day.

As long as they though they needed to lend us the money to buy their stuff, it was a price they had to pay. Now they are beginning to understand that they can get along without us. They will soon start to demand the risk premium that’s appropriate for debt that will decline in value over its lifetime.

In 1981 I was factoring our receivables at 6 points over prime. The prime rate hit 18%. That meant my first 24% in gross margin went to pay financing costs, before any operating expenses. Our company was snatched up at a bargain basement price by a German supplier who could borrow at more reasonable rates.

Our creditors’ big decision now is when do they want to step up and take the one-time hit? Money is a theoretical mechanism anyway. (Read “Greenback” by Jason Goodwin) Introducing a world trading currency would cause a huge fall in the dollar, but it would relieve their need to accept dollars, and the deflation risk that accompanies them, in the future.

For us, it means we start paying for our imports, especially oil, in a currency that has to be exchanged at whatever its current value is. We screamed about $4 a gallon. The Italian Lira buys gasoline at $4 a quart.

So how do we stop borrowing or printing money to pay our bills? It isn’t going to be easy. Take the stimulus bill for an example. Why aren’t we seeing the effect of an $800 billion infusion?

Because the first $400 billion disappeared. That’s how much the state budgets were under water for 2009 and 2010. Most states are required to have a balanced budget. No revenues, no services. Despite the many political speeches about being frugal, budget cuts were only by a fraction of what was missing due to reduced income tax and sales tax collection.

I have a friend who is a legislator on the appropriations committee at the state level. They were apportioning the stimulus money as soon as it was passed. Ten billion for education? That’s ten billion less that the state has to find. Fifteen billion for highway construction? One more highway we don’t have to pay for.

So at least half of the stimulus money is going to maintain current spending levels. The biggest impact of the stimulus is that things aren’t a lot worse than they are. The states have mostly avoided massive layoffs of their own.

We can’t stimulate the recovery by lowering interest rates, as is customary. Rates are at zero, so have no place to go. So the other choice is another stimulus bill. That means borrowing more. That means printing more money. You can probably see where this is going.

As to my Mom, she probably gets more on her CDs and no COLA on her Social Security. Her finances are a wash. Not so for the rest of us.

3. Why do you want to depress everyone?

Let me make this plain. This is NOT a political blog. Nothing I’ve said here places blame or points fingers. We are talking about gravity. It is what it is, and the effect is there whether you like it or not.

I’m not making any of this up. I’m not saying whether health care reform is right or wrong. I’m not trying to pin it on this administration, or the last administration, or Wall Street, or indolent Americans, or the Chinese. Facts are facts. It’s gravity.

I do think that the Fourth Estate plainly likes this administration more than the last, and is more favorable in its coverage. I do think that the media across the board avoids complex and difficult issues, and this problem is very complex. I do know, for a fact, that most folks don’t want to think about living though more of the same when it comes to 2009.

So when the talking heads tell you things are getting better, examine the information, not the delivery. Is losing “only” 500,000 more jobs actually an improvement? Is a positive GDP by itself enough to bet your next expansion on? Be very, very critical of what you see and hear.

Don’t ask me whether to buy or sell stocks. I have no clue. I’m taking the time to write this because I want my clients and other business owners to pay attention and to be ready. You are ready if you are running your business the best you can. You may say that you are doing that now, but you will need to do better.

4. What is a business owner to do?

Getting back to the basics is a hackneyed phrase, and like most over-used sayings, has lost much of its meaning. Here is what you can focus on.

Cash
Cash may be the only thing you have to fall back on if you hit a bump in the road. Your credit line is likely to be reduced, and may disappear. At the very least, it will be a lot more expensive than it was.

Do not pay down debt. Unless you fear a loan call because you are breaking covenants, continue paying today’s low-interest notes over their term. $100,000 in cash will make that $5,000 note payment for 20 months if you run into trouble.

Profits
Maintain profitability at all costs. It is the only way to generate more cash. You may want to take out the profits for tax purposes, but be prepared to lend them back.

It’s hard to keep up margins in a brutal pricing environment. You have no choice. Back in the inflationary 80’s we cancelled all catalogs and price sheets. Every one of our 5,000 SKUs were “call for price.” No one liked it, but we didn’t have a choice.

Many of our members are making the tough decision to give up the demanding, high volume-low margin customer. Whether you can afford to do that is dependent on your fixed vs. variable costs.. If you have high variable costs, especially if you are in a service industry, you may be better off without them.

Employees
If you decide to drop marginal business, drop those variable expenses immediately. Don’t become a cheerleader for “we can replace it in time.” You probably can’t, and you are bleeding cash every day that you try.

It’s cold, but if you lay off people the likelihood is that most of them won’t be going very far. You can get them back if you need them.

The last 12 months have shown you who gets it and who doesn’t. Every one of my clients admits that they have employees who acted like the recession was someone else’s problem, or have found it a convenient excuse for underperforming. It’s time for them to go, and seniority isn’t a factor.

Every termination, whether voluntary or involuntary, is cause to reexamine job descriptions. You should have one of those WWII posters up, but this one says “Is this hire really necessary?” Can you split the job up? Can you do it with a part timer? Can you do it with TWO part timers? There are plenty of folks out there in that 17%.

If you haven’t frozen wages, think about it now. Offer to share some profit instead. If there is an employment tax for health care, you will be sharing the burden instantly.

Purchases
Every purchase should provide a long term cost savings. Start downsizing vehicles at every opportunity. It really isn’t a question of whether fuel will be vastly more expensive. It’s only a question of how soon? By the time everyone else wakes up, small vehicles will be selling at a premium.

When your technology vendor says it is time to upgrade, demand to know what you will gain. “Faster” isn’t a feature if the operator isn’t currently at maximum capacity. The business world turned Vista down flat, and got away with it. Even Microsoft is learning that the customer has power.

Green is nice, but frankly it is a self-imposed competitive handicap to those who don’t participate. If paying more for electricity that is supposedly wind-generated makes you feel good, that’s great. If you can afford to be uncompetitive because your costs are higher, better still. (For the other guy)

My responsibilities are first to my family, second to my employees, and third to my clients. I feel a responsibility to the planet and humankind, but only after I’ve taken care of the first three. Short-sighted, I know. So shoot me.

By the way. At the risk of sounding like an investment advisor, I wouldn’t buy commercial real estate just yet.

Sales
I’m finding that sales people are the worst when it comes to blaming the economy for their performance. That’s why I started the series on compensation.

It’s harder than it was. Just answering the phone isn’t selling. Closing takes twice as long, collecting takes three times as long, and you have to beat off four competitors to get a reorder. So what’s your point?

The tribes who eat well during lean times are the ones with the best hunters. If your hunters aren’t getting the job done, you have to invest in better ones. This is the toughest place to suck it up. You can’t afford to lose a single sale, so what do you do about the salespeople you have who aren’t doing the job, but whose absence may cause more lost sales?

You can reduce your profits to add capacity until you can fire someone. You can fire them now and try to save as much as possible. You can reduce their compensation and let them quit, while preparing to cover their production. There is no painless way to do it.

A hard decision, but we are in a profession of hard decisions., and a time of hard decisions. It won’t be the last one you make in the next couple of years.

And if this keeps you Awake at 2 O'Clock...well, join the club.