Recently, I have written about defining the future, being unemployed, and underemployed. Having a good insurance policy on avoiding these difficult challenges would be a good idea. However, buying a policy off the shelf from your insurance agent just isn’t an option.

One way to cope with challenging situations emerged from some words of wisdom from Pete Drucker who is known as “the father of modern management.” The best insurance policy is to build and develop a full life complete with diversity, multiple relationships, and interests. It is a process of developing “You Inc.” in ways that allows one to quickly bounce back from adversity and the challenges of life.

In my recent book, Learn to Win – A Major, written in collaboration with Dr. Mo Pickens, we tell golfers they have to invite and embrace challenge. While this book is about golf and providing the insight required by golfers to play better and learning to win, it provides the basic rules for success in any endeavor or line of work.

The first step in challenging uncertainty is to understand your strengths and likewise, identify areas where improvement is necessary. This means that you’ll always be assessing and developing areas of strength. It also means practicing self-development. This requires thinking about your life as it is and how you would like it to be. Golf is a lot like life. You decide what’s working and what’s not working and then implement a plan to fix it.

In the current economic environment, it probably makes sense to make sure you have plenty of options. This could mean creating a second career or a least something that parallels what you are doing now. In fact, this is the path I have taken. I have utilized my knowledge and skill with golf combined with the ability to write to expand from my CPA and consulting career into new areas of endeavor.

I haven’t given up on being a CPA, but I am using my ability to write to create new books, concepts, and other efforts including teaching. This is a great way for me to share my knowledge and expertise in different ways. I have chosen to define the future by creating it.

The future will be a new series of business books which will be based on my teaching and training programs. This information and knowledge will be shared on this web site and with posts to my blogs. Another new book will be developed to help unemployed people discover themselves and ways to earn a new living. We are also going to keep writing golf books with special emphasis on junior golf.

This will keep me energized and focused and provide my readers with an abundance of new ideas and material. It will be an interesting journey that provides a win/win for everyone.

Everyone wants success. The difficulty with achieving success results because it hasn’t been clearly defined. I am going to give you a 5 step approach to achieve success and build the value. The secret to creating value and achieving success starts with a vision for what you want to achieve and how you define success and the steps that are associated with it. The 5 steps necessary to achieve success are:

1. Create a Vision for Success

2. Set Objectives

3. Develop a Strategy for Making it Happen

4. Build Action Plans

5. Evaluate Performance

Following these 5 steps and documenting them are essential to keep your life or your business on track. This doesn’t need to be a complicated process, and in fact, the simpler the better. However, putting these steps into a written document is essential and helps to build the commitment necessary to convert the vision for success into reality.

1. Create a Vision for Success

A mission statement should be brief and focused. It can be nothing more than a few words or phrases that provide a description of how you define success for you and your business. It should become a living document about where you’re headed going down the road. When you define where you are going you have a better chance of getting there.

Your vision statement should spell out where you plan on going and the steps required for getting there. There needs to be a link with the goals and objectives required for achieving the desired level of success. The best vision statements are simple and straight forward. Keep it simple and spell it out in contrast to just thinking about it. Writing the vision versus thinking about it is usually the difference between success and failure.

2. Setting Objectives

After establishing a vision for success, the next step in the process it setting goals and objectives. Setting goals and objectives stems from the vision statement and assessing current performance and the major issues that need to be addressed and how they relate to strategy to accomplish your objectives.

Objectives should specify measureable results that need to be accomplished together with a target date or a time span for completing it. Objectives should be as specific and quantitative (measurable and verifiable) as possible. Development of objectives should specify only what and when it needs to be accomplished and should not venture in to the why and how. Objectives and goals should relate directly to crafting a strategy to achieve your objectives.

3. Develop a Strategy to Make it Happen

Strategy corresponds to the actions and approaches necessary to achieve your objectives and fulfill your vision. The components of strategy include deciding on those attributes which offer the best chance to achieve your objectives or to gain a competitive edge. Strategy is where you focus on the skills, expertise, and competitive capabilities that will set you apart from your rivals.

Strategy is about being different in contrast to something that everyone is or should be doing. It boils down to making the tough choices that create a sustainable competitive advantage. These choices are those that allow you to change the rules in your favor.

4. Build Action Plans

Action plans are when you need to get more specific to clearly identify what has to take place. They represent an opportunity to test and validate your objectives. In addition, they provide a basis for communication for others who need to contribute to or will be affected by what takes place.

The following basic components should be part of the plan development. First, document the specific steps that will be required. Next, it is important to identify the people who will be held accountable making sure that each action step is completed. Developing a timetable getting things done is essential. Make sure to determine what resources will be needed to achieve your objectives. Finally, it is critical to provide feedback mechanisms to monitor progress.

Documentation provides a basis for monitoring the progress of each action step. Incorporate this documentation into a schedule that spells out what needs to get done and when.

5. Evaluate Performance

“If you can’t measure it, you can’t manage it” is a term frequently associated with achieving results. Monitoring and evaluating performance is essential if your vision is to become reality. It might be necessary to reevaluate your strategy depending on how things are working out. Assessing the financial impact is essential in determining if you are achieving the level of expected results. Regularly evaluate your resources. Do you have everything in terms of personnel, materials, information, and other resources to support your vision and strategy? After establishing the vision, the strategy, objectives, and action plans, it is essential to monitor the few vital factors that let you know whether or not you are on track or if modifications are necessary. Continually check your progress and respond appropriately.

Final Thoughts

When creating a vision and converting it into reality is not only critical, it is essential to put it into writing. Written goals and objectives are more likely to be accomplished. Make this a habit and I think you’ll start to see success. Written plans represent a commitment that translates into success.

Gaining an understanding of strategy and its objectives is essential not only for business, but in everyday life. I teach this topic to my accounting and finance students and thought it would make a good blog post.

Competitive strategy is really about being different and selecting a different set of activities capable of delivering a unique mix of value to customers. In the process of selecting a different set of activities it boils down to the choices you make to change the rules in your favor so you create a competitive position that eliminates the competition.

Choices to change the rules should include setting the right goals. A sound strategy might be to achieve superior profitability by not becoming too big or growing too fast. It might involve becoming a technology leader. Strategy needs to have continuity and is something that can’t be constantly reinvented. It boils down the basic value you are trying to deliver to customers. It is important to maintain a strategy that is consistent in the face of a multitude of changes.

A good strategy will ensure that its components will drives competitive advantage and sustainability. There should be a simple consistency between each functional activity and the overall strategy. This will occur when activities are reinforcing and there is an optimization of effort. A good competitive strategy will grow out of the entire system of activities.

Essentially there are five steps in developing strategy which are presented as follows:
1. Formulating a strategic vision of the organization’s future business composition and the direction on where the entity is headed.
2. Setting objectives.
3. Crafting a strategy to achieve the desired outcomes.
4. Implementing and executing the selected strategy efficiently and effectively.
5. Evaluating organizational performance and making appropriate corrective adjustments wherever necessary.
These five primary tasks become a continuous loop whereby you are observing, orienting, deciding, and acting on necessary adjustments as needed. In the current economic environment, organizations need to be agile and quick in making these decisions.

Good strategy can involve a variety of approaches. This might include a variety of cost approaches ranging from low cost/low price, differentiation, to a specific market niche. Other approaches include responses to changing market conditions, moves to secure a competitive advantage, geographic market coverage, and vertical integration. In addition strategic approaches include financial approaches, human resources, R. & D., marketing, manufacturing, and collaborative partnerships and alliances. The development of the strategy will certainly consider some of these options.

In addition to various approaches, there are some fundamental components of strategy. Foremost, it will be essential to decide what product or service attributes offer the best chance to win a competitive edge. The next step is to develop the skills, expertise, and competitive capabilities that will set the business apart from rivals. Your choice of strategic components should insulate the business as much as possible from the effects of competition.

Attempt to evaluate your firm or company as to whether it is either conventional or reactive. Another way of looking at the evaluation is to determine whether your firm is distinctive and far-sighted. One way of assessing this is evaluating which issues absorb management’s time and attention. How does management’s point of view regarding the future measure up against the competition? Are you better at improving operational efficiency or at creating new businesses? Is the company’s agenda determined by actions of competitors or is it set based on your own unique vision of the future? Within the organization, what is the balance between anxiety and hope?

Finally, it is essential to assess the quality of your strategic market leadership in terms of the customers being serviced today in contrast to those you expect to service in the future. This same question can be directed to your current competitors and who you expect to compete against in the future. Where are your profits earned today and versus where they will be earned in the future? Effective strategy is dependent on resolving the key questions of what drives your business today in contrast to what will provide the competitive advantage in the future. In too many instances, organizations fail to address these issues and follow the course of plodding from day to day with not real thought of the future.

How valuable are CPAs to their clients? What do clients want their CPAs to do for them? These questions have puzzled me and frustrated me for some time. After giving this some thought I reached the conclusion that clients don’t receive value and CPAs don’t provide the value they are capable of delivering.Creating value lies in the pursuit and development of value propositions. Value propositions aren’t defined in the tax code or in generally accepted accounting principles, yet it is the secret to greater profitability which is created by providing needed and necessary services. Clients want more than taxes and accounting from CPAs. They want and need help with their businesses, especially when economic conditions are tough. This means defining customer value in terms of what services CPAs provide and how they do business with their clients. Here is where you can link price together with reliability, dependability, and convenience of the service provided.

Far too many CPAs provide a service, but miss out on providing and building client value. This occurs because they haven’t taken the time to develop the knowledge and understanding as to what clients really need. You need to ask the key questions of clients so you know what they expect of you and how they think you could help them address their challenges and opportunities. This most likely means the ability to provide them with management consulting in strategic and operational areas.

Developing a basket of services which provide value will allow you to value bill. This begins with understanding clients needs and translates into increased profitability for you relative to the hours expended. You now have a choice on what you charge because the client is receiving greater value from the services you provide.

You might end up servicing fewer clients and receiving greater revenue. Providing added value services to clients you truly want to work with ends up being a win/win situation. You can develop some ideas relative to the types of services by reviewing the list of services I offer both to clients and as resources to CPAs.

Employing a value proposition strategy to your practice is an effective way to re-engineer what you are doing by giving clients the services they need and want. Providing added value to clients puts you in the driver’s seat and lets you value bill in contrast to just being paid for the hours you charged to an engagement. It also creates a better overall client experience since it enhances the flow of communication and avoids difficulties and problems which can occur.

You can now start charging the maximum amount that a client is willing to pay which results in greater revenue and a more productive work environment. You will have happier clients since they now perceive they are receiving the value they wanted and are willing to pay for it. Your practice should grow because happy clients talk and this should translate into increased work. This is truly a way of working smarter and not harder.

What is a mission or vision statement? In brief terms, a mission statement is a description of how an organization defines success and where it is headed going down the road. In order to be successful, a mission statement needs to be more than just words or phrases. An effective mission statement needs to be a living document that provides the necessary focus for all levels of the organization.Despite the importance of defining a mission, there have been a lot of failures to create any change in organizational performance or in what people are doing to accomplish results. One of the big problems is that mission statements fail to effectively communicate to employees on where the company is headed. Mission statements also fall short on linking strategic direction with specific goals and objectives at all levels of the organization.

It is critical for organizations to define their future business direction so employees clearly understand where they are going and how they will get there. From this platform, organizations need to develop a definition of success and a process for setting goals and objectives. Together with these steps, it is critical for the entire organization to have clarity on its sources of strength and competitive advantage.

Once organizations get these step right, they need to move forward to clarify “the what, where, and how” of competitive success. This message then needs to be effectively communicated to employees and other people who have a stake in its success. A process of setting goals and objectives at all levels of the organization needs to be complete so everyone is on the same page in order to achieve a successful execution of the mission.

In many instances I think the objective setting process can be simplified. It doesn’t need to be complicated, but there needs to be buy in at all levels and everyone needs to know their role and how they fit into the plan. Defining an effective set of objectives might sound easy, but it is a tough job and is critical to achieving success.

The key to a successful mission or vision statement boils down to the following three steps:
1. Where is our business going?
2. What are our objectives?
3. How will we accomplish our objectives?
After these three questions have been answered, the key to success is to effectively convert the answers into performance objectives for employees at all levels of the organization. Organizations that commit to this process with focus and determination will be the winners.

In the current economic environment there are lots of business owners struggling to deal with issues and problems and no idea on where and how to get help. Likewise there are CPAs who are asked by their clients for assistance in areas where they lack the knowledge and experience to provide support. It is a perception that help has to be geographically accessible. The reality in many situations is that there are virtual means of accessing the necessary experience and assistance.Many services, including training, can be provided virtually using the telephone, e-mail, and conferencing tools. I selected the areas of my expertise that could be delivered virtually. It is possible to review strategy and operational situations by using my questionnaires and experience in effective ways. Another situation faced by many companies is that they lack the financial expertise to provide the financial and controllership skills required to survive the current difficult economic environment. Virtual tools are available to share financial information and in many instances an experienced financial manager can provide the needed suggestions that can make the difference between success and failure.

Internal controls represent an area where CPAs need some assistance so they can avoid reinventing the wheel. In many instances I can provide instant answers to questions and provide suggested solutions that could otherwise take hours to solve. Based on working with the COSO internal control framework and assessing audit risk, I can provide direction and advice to practitioners and even help them review their work papers to minimize their risk.

My dealings with family-owned businesses have provided me with firsthand experience in working with succession and planning issues including estate and trust planning tools. It is like having someone working in your CPA practice where you can discuss and review a problem for potential solutions.

Some other areas where virtual assistance is available are cost management, operations and supply chain management. Why struggle with these areas when help is a phone call away. I can also provide assistance with strategic planning and share checklist and questionnaires that will allow you to facilitate development of strategic thinking with your clients. If you are a business looking for assistance, I can provide virtual support and training in these and other specialized areas.

You may not have given thought to using virtual support or training, but it available and utilized all the time. It is a cost effective way to receive the assistance you need. Give me a call to discuss ways that I might be of assistance.

It seems like economic crisis and tough times are all we hear about these days. In a recent publication of Accounting Today an article appeared talking about the need for CPAs to step forth to provide assistance to small businesses. We need to provide guidance but small business people have to make a paradigm shift and realize they need help. They have been used to going without financial assistance for far too long and CPAs have been too focused on tax returns and financial statement preparation. Change needs to happen if businesses are to survive. My web site contains a lot of information both business owners and CPAs can use to survive the recession.CFO and Controllers of larger companies are also in a survival mode. They are laser focused on cash preservation and cost reduction. The key areas of focus include the following:
1. Preserving cash
2. Reducing costs
3. Reducing risk
4. Understanding expenditure patterns
5. Plugging holes in the dike
Over emphasis and indulgence on these factors can lead to overlooking some potential opportunities.

I think small business and larger organizations are missing the boat by placing all the emphasis on cutting back and hunkering down. Risk management should include looking for opportunities in addition to potential risk events that could adversely affect the company. Risk management should include considering opportunities to do a better job of purchasing and improving visibility on spending. Cash conversion efficiency includes managing accounts payable and inventories. These two areas represent a significant source of extra cash. It deserves additional focus and effort that will produce extra cash and liquidity.

Risk management includes effective planning and development of value propositions. Reevaluation of business strategies must be addressed since the old business model has shifted. New product lines and new markets need to be evaluated. More than likely the old rules no longer apply. Survival will depend on creating new visions and new strategies. These strategies then need to be linked to new marketing and sales programs. One of my clients is now spending a significant amount of effort developing new products and markets because the streams of revenue that existed just a few months ago no longer exist.

Operations and strategic planning when combined with sound financial management concepts and methodologies represent exactly how businesses need to deal with the economic crisis. Linked to these concepts are lean accounting and value stream analysis based on the voice of the customer.

I think this back to basics approach is what is required to cope with the challenges we face and represents the road less traveled to build healthy businesses and an economy that will survive the test of time.

Deciding on what product and or service attributes will provide the best chance to win a competitive edge strikes to the very heart of how to develop an effective strategy. There are a number of approaches that can be used to craft a winning strategy. In this post we will identify some of the more common techniques that can be deployed.One approach many companies use, especially during difficult economic conditions, is a low-cost and low price approach. An alternative approach is one of differentiation and selection of a specific market niche. Differentiation can represent a more profitable option.

During a turbulent economy you will see a number of companies making moves in response to the rapidly changing industry conditions and other factors that develop in the external environment. This is one of the reasons adopting and maintaining a strategic focus is so essential when times are tough and competition heats up. Many of your strategic choices will go beyond just pure survival; they will be to secure a competitive advantage.

Another element of strategy relates to geographic market coverage and the extent of penetration in the market. Companies who got stretched with excessive capacity will have to consider adopting this approach to secure markets and customers to consume this capacity. One approach that some businesses have followed is deciding to pursue vertical integration to enable more sales to existing customers.

There are a number of different financial value propositions that are used by companies as a component of their strategy. Additional choices include the application of human resources, research and development, technology, and a variety of marketing promotions. Linked to these options will be manufacturing and operational approaches that fit with these choices.

A unique approach to strategy as we proceed into the 21st century is collaborative partnerships and strategic alliances. This seems to be a growing trend since it is difficult to be all things to all people making this a choice of necessity.

Strategic choices require developing skills, expertise, and competitive capabilities that set the business apart from rivals. The goal is to insulate your business as much as possible from the effects of competition. From this step you need to perform an analysis of the strategic variables and match them with your capabilities as well as your competitors. Strategic and competitive analysis is a critical component of crafting a winning and sustainable strategy.

You need to carefully think about your point of view relative to the future and assess how it stacks up against your competitors. Are you a risk-taker or just a rule maker? Another question that begs answering is what percentage of your effort is focused on catching up to competitors versus building business advantages that will take your business successfully into the future. It is critical to evaluate your agenda and determine whether you are setting it or if it is being driven by the competition.

While times are tough and success doesn’t come easily, it is imperative to think into the future and set the course for where you plan to be in five to ten years.

Don’t Panic
Take a lesson from the pilot of US Airways flight 1549 who was forced to land his Airbus in the Hudson River with all the 155 people on board surviving. I think this is a critical lesson when trying to survive in a recession. This is the time to keep your wits about you and keep a level head.

Develop a Plan and a Budget
In uncertain economic times there is no way of knowing what’s going to happen or how bad things might get. In these situations I tell clients to develop a worst case scenario budget. This budget should be a rolling forecast so you are continually projecting your best estimate of what you think will happen and develop. Be conservative on your estimate of sales and revenue and hold the line on expenses. It is critical to monitor and measure your financial performance in all categories, especially cash flow.

Cost Reduction
Evaluate all opportunities to tighten your level of expenses. I developed a Recession Survival Toolkit that contains extensive information and tips on cost reduction to managing cash flow and obtaining credit. While most businesses are laser focused on controlling payroll, they do this through layoffs. There are multiple ways of containing payroll other than terminating employees. These steps include salary cuts, reduced hours, and vacations without pay to list a few ideas.

Strategic Planning and Thinking
A recession is the time to establishing a strategic plan. I urge clients to create a clear vision of the future realizing there is a lot of uncertainty. It is imperative to be agile and ready to move in different directions with your response to changing conditions. You need to have a number of options so you are not locked in to a narrow strategy. In fact I like clients to have a reasonable range of options because it allows you more flexibility.

Selling and Marketing
I think a number of people fail to think proactively about sales and marketing opportunities during a recession. Managing risk is as much about identifying opportunities as it about looking for things that might produce a negative impact on the company. Companies need to be aggressive with their sales effort because the psychology of recession is taking buyers out of the market. When there are fewer customers it is critical to aggressively pursue maintaining or increasing market share. However, this should not be achieved at the expense of giving up your profit margins. This is when I apply profit focused accounting to match costs with selling price to maximize profit margins. I see too many executives cutting price just to gain volume in contrast to employing all the necessary tools to maintain profitability.

Cash is King
In a recession, cash is king. It is critical to maintain lines of credit and have them available just in case. The key is to maximize your cash conversion efficiency. This concept is focused on turning accounts receivable into cash as quickly as possible and at the same time reducing your investment in inventory. The other component is stretching accounts payable as much as practical without losing discounts or damaging your credit worthiness.

Using BBV^TM
Building Business Value is our approach to building value using proven management methods that preserve shareholder value. A recession is exactly the time to stay with proven management techniques and methodologies. One of my suggestions in this regard is to make sure you have the right people on the bus and in the right seats. Good execution of management fundamentals should be the objective. My final thought is to utilize my change management concepts to make sure you don’t get lock into doing things just because of your pre-recession comfort zone.

When all else fails, do as Debbie Reslock suggested in yesterday’s Denver Post. “Bid in the dark and shoot the moon because through it all, I still have faith. With out looking at the cards, I’m betting on all of us.” I am betting on Debbie’s hand, I think she’s got a winner.

How much appetite for risk does an entity have relative to its pursuit of value? Each entity has to develop its own appetite for risk. This will depend on achieving an acceptable balance between growth, risk, and return and creating the proper relationship between risk appetite and strategy.

Effective risk management and execution of strategy requires appropriate alignment of people, processes, and the supporting infrastructure of the organization and process owners. Appetite is linked directly to strategy and is aligned with the desired level of value creation. Different strategic options will evolve based on the assessment of risk attached to each strategy. Therefore, management style and approaches to strategy will drive varying levels of appetite for risk-taking. When setting strategy, entities will vary in their approaches to risk. Qualitative approaches will categorize the entity’s appetite for risk as green, yellow, or red (high, medium, low). Entities that employ a quantitative approach will consider appropriate goals for growth, return, and risk. Risk management helps the management team choose strategies that blend with the organization’s goals for creating value.

There are a number of considerations that impact an organization’s appetite for risk. These factors will vary from business to business. It boils down to what risks the business wants or is willing to accept and what risks they want to avoid. The desired rate of return on initiatives is one of the factors that will influence risk appetite. Risk appetite will be affected by the current rate of return and the competitive need to accelerate growth. The strategic focus of the entity will directly impact whether a company has a high or a low appetite for accepting risk. Risk management needs to consider the organization’s appetite for risk and then guide management in selecting and balancing their decisions in their choice of initiatives and allocation of resources. The tolerance for entity-wide risk will then enter into the selection of objectives in the pursuit of its strategic vision.

Risk tolerance and appetite represents a balance that helps keep businesses and organizations on course and helps to avoid unnecessary and avoidable surprises. It is like walking a tightrope and then deciding how high you are willing to be, in case you fall.