The primary desire of family business advisors, like myself, is to see family-owned businesses live on for many generations. But some family businesses are beyond saving and want to die peacefully.

Those businesses need hospice.

Hospice is a service and philosophy of care for terminally ill patients. Hospice has four primary goals:

1. Relieve the pain and suffering of the terminally ill;
2. Make possible a “good” death;
3. Help the family; and,
4. Assist in the search for meaning.

While best known for helping a terminally ill person and their family, there’s a growing need to extend hospice to terminal family-owned businesses.

Terminal family businesses can be characterized as having one or more of the following situations:

• The next generation has no interest in continuing the family business. Less than 40% of first to second generation hand-offs are successful. Less than 15% of second to third generation hand-offs survive.
• The siblings of the next generation dislike one another, don’t talk to one another, don’t trust one another, refuse to work together, and/or refuse to define a unity strategy. I recommend Doug Box’s new book Texas Patriarch for an actual, first-hand account of what happens in a wealthy family that can’t get along with one another.
• The business has outdated products and processes, serving a declining market and customer base, with little or no hope of change or improving. I’m not just talking about buggy whips. I’m talking about examples such as Uber grabbing the taxi market.
• The family lacks the will, ability or initiative to turn around their bleedingbusiness and seek to sell the body to someone. Most family business owners have over 75% of their retirement money tied up in the business. They need a way to cash-out.

A hospice story

Certified family business advisors are trained and equipped to provide hospice-type services. Lisë Stewart, founder and president of Galliard Family Advisor Institute, recently shared a hospice-type story.

A third generation family member asked Lisë to go with him to meet with his grandfather and father. She asked “Why?” He replied, “I need your support when I tell them that I have no interest or intention of joining the family business.” That’s an example of family business hospice care.

Is your family business in need of hospice? I’m ready, willing and able.

Church announcements are symptomatic of a common business problem. Leaders intend to communicate useful information but fail to make it understandable to all of the audience.

For example, this is the announcement made from the pulpit of my church yesterday: “If you are a first-time visitor, please tell us more about yourself by filling out the bottom of The First Cup and either put it in a giving box or visit Starting Point.”

• Visitors don’t know First Cup is the name of the piece of paper they may or may not have been handed entering church;
• Visitors don’t know what’s a “giving box” or where they’re located; and,
• Visitors don’t know what’s Starting Point and where is it located.

Here is a clear test to make sure you aren’t speaking in code: Could a first-time guest understand exactly what you are saying if they knew nothing about your church?

Speaking in Financial Code

Well-intentioned business leaders make the same error as church leaders. They inadvertently assume everyone in the audience shares a common level of knowledge.

For example, with the intent of communicating clear goals for the coming year, a CEO says: “Our top three financial objectives for 2017 are to increase margins by 5%, improve cash flow and add at least 5% to our ROCE.”

Most employees have never had an accounting or finance course.

• Employees don’t know much, if anything, how to calculate Gross Margin (also known as Gross Profit) much less how they can help improve it;
• Employees may have heard about Balance Sheets and P&Ls but few have seen a Cash Flow report. In fact, over 50% of business owners don’t know how to read, interpret or use a Cash Flow report; and,
• Employees may have heard the acronym ROI (return on investment) used but few have heard about ROCE (return on capital employed) or how to improve it.

The Jack Howe Question

My dearly departed friend and mentor Jack Howe taught me a lot about business. When someone asked me a question I don’t understand, Jack taught me to reply “What do you mean by that?“ One of two things happens: (1) The questioner explains the question using simple language you now understand and can clearly answer; or, (2) They drop the question because they don’t understand what they’re asking.

Finance for Non-financial Employees

If your employees say “What do you mean by that?” when they’re given financial goals for 2017, give me a call. I’ll teach them how to read, interpret and use a Balance Sheet, Income Statement and Cash Flow report during a 1/2-day onsite workshop.

To request a free workshop agenda email TomPryor@icms.net .

Columbus never achieved his goal but we celebrate the outcome of his failure.

Columbus was obsessed with finding a westward route to Asia from Spain. Finding it would enrich not only his Spanish patrons, primarily Queen Isabella, but himself as well.

Columbus attempted and failed four times to find a westward route to Asia. On his first voyage in 1492 he failed to find a route to Asia but found North America. His second and third voyages were likewise failures but nonetheless led to his discovery of South America.

And on his fourth and final voyage in 1502 he crashed on a Central America beach. The site where Columbus ended his sailing career is where centuries later mankind would dig the Panama Canal providing ships the westward route to Asia Columbus set out to find.

Columbus failed to sail westward to Asia but succeeded in discovering North, South and Central America.

Like Columbus, I experienced an unexpected benefit from a failure.

As a controller at Motorola, I set out in 1986 to discover a more accurate cost management system to support Six Sigma. I discovered Activity Based Costing (ABC) but failed to convince Motorola senior management to implement it. So I resigned from Motorola and became an entrepreneur. I started an ABC software, consulting and training company, ICMS, Inc., in 1988. And in 2016 I’m still helping companies improve their cost systems 29 years later!

Moral of the Story

When your intentions are good, the outcome is usually positive, although not always specifically what you set out to achieve.

But when your intentions are evil, bad or self-centered, none of the results are ever good.

I believe Columbus would be shocked to know that we created a national holiday to celebrate what he considered a failure.

What outcomes of failure do you celebrate personally or professionally?

It took the dentist and his assistant only 10-minutes to perform my scheduled treatment. But I spent 60-minutes in the chair staring at a computer screen.

What are the root causes for me wasting 50 minutes waiting for my treatment to be completed? To answer that question, I’ll use The 5-Whys method I was taught decades ago in Six Sigma class.

1. Why wasn’t the dentist immediately available at my appointment time? He was working on two other patients in adjoining rooms that had arrived just before me.
2. Why did my dentist have more than one patient in the office? Because switching back and forth between 3 chairs is how most dentists believe they can maximize revenue.
3. Why does the dentist need more revenue? To pay for the overhead costs of having 3 fully-equipped treatment rooms, space costs for 3 rooms plus 3 dental assistants to tell patients “The doctor will be right back“.
4. Why don’t most dentists treat one patient at a time? Because they believe treating one-patient at a time is good for the patient but not for the dentist.
5. Why don’t dentists believe treating one patient at a time is good for them? Because dentists are either unaware of lean principles, they think lean is a manufacturing practice not a medical best practice or they’re unaware of the profit and customer satisfaction benefits of one-patient-flow Lean Dentistry.

I like my dentist and his staff. But I hate their process.

“Only the unprepared are afraid.“ Peyton Manning

That was Peyton’s response when asked “Are you nervous before you speak to a large crowd?”

I was not fearful or nervous before my speech last night for the Dallas-Fort Worth Institute of Management Accountants. The title I chose for my talk was Rich Accountant, Poor Accountant.

Here’s how I prevent speech fright:

• I share my own stories to minimize fear. I know the stories are true because I was in it. Last night to emphasize the positive impact mentoring has on both the mentor and the mentee, I shared my experiences mentoring prison inmates on developing their business plans.
• I prepared 10 PowerPoint slides for the 50-minute talk. Any more than that and I would have fear of running over my time allotment.
• I timed a trial run of my talk in my home office a couple days before the event. My experience doing a dry run by myself is that I talk 50% faster by myself than in front of an audience. I timed myself at 33 minutes by myself. When I delivered the talk last night it ran 50 minutes. Perfecto!

Someone asked pastor Chuck Swindoll how long it took to write Sunday’s sermon. Chuck replied, “Forty years.”

How long did it take me to write Rich Accountant, Poor Accountant? Forty years. How long to deliver it without fear? 50 minutes.

“I wish there was a Waze app for navigating my business and career.“

When driving I use the Waze app on my cell phone because:

• It offers me alternative routes to my desired destination.
• It routes me around unexpected obstacles, like accidents.
• It re-routes me to my desired destination if I make a wrong turn or mistake.

Someone recently asked “Is there something like Waze for my business?”

I answered “Yes, there are three versions. Mentor, coach or business advisor.”

Instead of you looking at a screen they look you in the eyes. A mentor, coach or business advisor ask great questions. They listen. They help you decide.

Like Waze, these three business applications offer alternative routes to your desired business or career destination. And using their personal experience, skills and wisdom, a mentor, coach or business advisor guides you away from obstacles and picks you up when you’ve made a mistake.

If you or your business needs a Waze, download me at TomPryor@icms.net .

President Dwight Eisenhower and President Abraham Lincoln share something unusual in common. Neither had the support of family or friends when they ran for president.

No one in Lincoln’s family voted for him. And no one in Eisenhower’s home town of Denison, Texas voted for him. Though both lacked the moral support of family and friends, both won their presidential elections.

Lincoln and Eisenhower’s situations reminded me of something I learned decades ago.It’s more difficult for you to win over family and friends than the general public. A pastor was the first to warn me of this. He explained, “Your family remember how you acted before you became a follower of Jesus Christ. They’re going to be skeptical that you can change.”

The same attitude is often exhibited by your boss. “You can’t have any good ideas. You work for us.”

Good news! Lack of support from family, friends or bosses does not dictate your fate!

Lincoln and Eisenhower won because they sold big ideas not themselves. Lincoln promoted the end of slavery. Eisenhower promised to stand up to the communists as commander-in-chief.

Are you feeling like no one believes in you? Learn from Lincoln and Eisenhower. Identify something bigger than yourself. Something of importance that will add value to lots of people. The acceptance and appeal of that one big idea will raise your measure in everyone’s eyes.

My story

In 1985 a senior leader from Motorola HQ stopped me in mid-presentation, looked at my boss and said, “Don’t include anyone from accounting at quarterly operational reviews in the future. I only want to hear from people who can improve results, not report them.”

The leader did not believe in me. I could have gotten mad. Or I could have quit. But instead I sought out a better way to account for costs and improve decision-making. I found it. It was new. It’s called Activity-Based Costing (ABC). Finding and implementing that improved method resulted in Motorola’s leadership offering me a promotion in 1986. I turned it down, however, because my finding ABC opened even better career opportunities.

Your story

Find and promote something bigger than yourself and then people will believe in you.

Does your cost system need to be precise? Probably not.

Does it need to be accurate. Yes!

What’s the difference? The four pictures above begin to provide an answer.

Accurate costs are random but near the target. For example, I have a refrigerator with a thermostat that keeps it a constant 38.0F. I test it with a dollar store thermometer 10 times. The temp readings range from 37F to 39F. Therefore, my inexpensive measurement system is accurate …close to the 38.0F target … but lacks precision.

Precise costs are repeatable but not necessarily accurate. Using the refrigerator example, an expensive scientific thermometer would have decimals and register precisely the exact same temperature during each of the 10 tests. The precise measure might be 36.05F after each of the 10 measurements or it could be precisely 38.05F each time. How could an expensive measurement system be consistently different? Not calibrating the measurement system before use is commonly the root cause.

Precise implies accurate but that assumption is wrong. Precise systems are more expensive than accurate systems but often not what we need.

You may be thinking “Why should I care?”

Short answer is “To have a profitable business, you’ve got to match the accuracy of your cost system to your type of business“.

Select the situation that best describe your business:

1. Low Accuracy-Low Precision: If you’re the sole provider of a new product or service that delivers high value to customers, you don’t immediately need an accurate or precise cost system. Charge customers whatever price you want as long as net profits exceed 10%.
2. Low Accuracy-High Precision: If you have competitors with published prices, you need a precise cost system. A precise cost system, like Activity Based Costing (ABC), will consistently enable you to define, implement and measure continuous improvement to eliminate waste and compete.
3. High Accuracy-Low Precision: If you Bid & Quote for new business, you need an accurate cost system. If your bid is based on inaccurate costs, one of two things will happen; (1) your batting average on bids will be low; or, (2) you’ll win unprofitable orders you wished you hadn’t won.
4. High Accuracy-High Precision: If you compete in a market that has excess capacity, you’ll need a precise and accurate cost system. An Activity Based Cost system works well here because it measures Non-Value Added excess capacity. To take sales revenue from competition, you may want to price your product or service based on a highly accurate cost that excludes the precise expense of excess capacity.

Barometric pressure is precisely useless information. It’s precise because it has two decimal points, e.g., 28.35. But to me it’s not accurate because I don’t know what the number implies, what I should do or what I should expect.

If your choice of cost system has your head spinning like barometric pressure does to me, give me a shout. I’ll help you match your needs to the best costing method. 

“Competitive advantage is now based on what you know rather than what you own.” Mary Adams

Have you noticed that your customers, your boss, your co-workers, your friends and your family all share something in common? They all value what you know, not what you own.

If you’re a plumber, the customer values your ability to identify the root cause of their water leak. They don’t value your new truck or tools.

If you’re a family business advisor, the customer values your questions and how they lead to answers that improve their situation. They don’t value your laptop or new website.

If you’re an employee, your boss and co-workers value you saying “I’ve seen this situation before, so here’s what I recommend we do.”

If you’re a manufacturer, your customers value your knowledge of the requirements of their business and industry, not your new ERP system or robots.

Or if you’re a church music minister, the pastor values your knowledge of the Bible and how you chose the perfect songs to support their sermon topic, not your new keyboard.

What is the “Trigger” for someone to call you? It’s what you know, not what you own.