Pay Me Now, Pay Me Later – Eliminating Fire-Fighting in Business

One of the biggest causes of frustration for business owners is constant “fire-fighting.”  Things go wrong unexpectedly and much effort is required to take care of the issues.  These problems suck up cash, resources, and time and business owners have to delay positive efforts, limiting growth and reducing customer satisfaction.  To these owners, it seems that when one fire is put out, another one rises. This cycle seems endless. 

I have found that in most cases, prevention of the problems takes a bit of foresight and planning upfront that will eliminate chaos and tons of wasted effort solving the problems.  Warning:  The “fix” is not new ideas or technology!  The fix just is not used as often as it should be.

As an example, recently, I was asked to help Michelangelo’s Flood and Fire Repair, a $5.1 million restoration company who ran into a cash shortage situation.  The first place I always look when cash is tight is Accounts Receivable – who owes money for completed work.  In the case with Michelangelo’s Construction, very few customers were late paying and the amount overdue was not appreciable. Working back from their there, the owner and I looked at jobs in progress.  We saw that multiple projects were expected to close within the next two weeks and would result in about $837,000 in revenue.  At $5.1 million in revenue, the revenue run-rate for Michelangelo Flood and Fire repair should be close to $100,000 per week.  The $837,000 that could be collected in the next two weeks should be about eight weeks of revenue, which means that Michelangelo’s Flood and Fire Repair projects had fallen about six weeks behind.

To understand why the company project portfolio was six weeks behind required digging into each project to find out where things were taking longer than plan.  In the case of Michelangelo’s, projects involved an insurance company and some, but not all, of the issues that caused projects to fall behind involved paperwork requirements of the insurance industry. 

1.       Custom ordered materials (doors, windows, cabinets, countertops, carpet) were late or had to be returned and reordered because they were damaged or not correct.  Issues with late materials typically results in multiple phone calls and trips to the supplier, and often, an upset customer.

2.       Cannot connect with the customer to obtain a signature on the insurance form to denote that the project has been completed satisfactorily.  The result is making multiple phone calls and sometimes multiple visits to the customer.

3.       Insurance company has not completed the final review of the paperwork prior to releasing a check to the customer.  Multiple phone calls need to be made to find out when the review will be complete.

4.       The insurance check requires multiple signatures – a bank, other parties who co-own the property, etc.  Often, the customer is placed in charge of this, meaning extra effort for them.

As it turns out, these four areas of concern are common to many project and fall late in the project timing.  A slip in any of them, in almost all cases, directly impacts the completion of the project and collection of payment.  However, for all of them, a little additional effort up front can minimize or prevent issues at the end.  For instance:

Custom Ordered Material

1.       When ordering custom material, spending an extra hour with the supplier to understand his design processes and implementing checks and approvals at critical steps to make sure the design drawings are accurate minimizes chance of receiving incorrect material.  Setting up dates when these checkpoints should occur helps to stay on top of the situation. 

2.       Reviewing shipping and packing procedures of the supplier to make sure damage won’t occur helps to minimize the change of damage during shipment.

Customer Signature  

1.       Setting up an initial walk-through procedure with the customer helps to identify any issues prior to completion of the project.   

2.       Remedying identified issues and conducting a final walk-through with the customer to verify everything is correct ensures customer satisfaction.

3.       At the final walk-through, obtaining the customer signature on the insurance form provides an ending to the project.

Insurance Company Review

1.       Obtaining a promise date from the reviewer sets expectations.

2.       At that time, ask the reviewer if it’s OK to call to verify the review has been completed keeps everyone on the same timeline.

3.       Additionally, asking the review what you should do to obtain confirmation if, when you call, the reviewer does not answer the phone drives agreement to a next step if required.

Multiple Signatures Required

1.       Verifying at time of service start the parties who have to sign the check allows for scheduling necessary activities.

2.       For multiple owners, explaining the process and negotiating an agreement on how best to get everyone’s signature sets expectations.

3.       If a bank is involved, identifying the bank employee responsible for review and signature, and what the person needs to see to sign sets expectations.  Negotiating with that bank employee how best to deliver the material needed and gain the signature puts everyone on the same timeline.

Implementing these preventative activities into the standard work flow has greatly improved project (and cash) flow and reduced project effort required.  Notice that in every case, a little forethought with just a small bit of effort upfront – planning ahead – can prevent weeks of delays and extra effort, and increases customer satisfaction in the end.  I have found that this philosophy works well in almost any business spending significant time and effort on fire-fighting.  Is this revolutionary thought?  No.  But given the frequency of companies in a continual fire fight, implementation of the process is rare.  Common sense?  Apparently not so common. 

Using Failure to Succeed

I met a lady at a networking event who was looking at the book, Money on the Table, Referrals in the Bank, by Dr. Ivan Misner and Lee Abraham, and recently contains a Special Section that I wrote, The Relationship Maturity Model.  She shared that she would like to write a book, Plan for Failure.  She mentioned that you can buy a million self-help books concerning planning for success but no one has written one advising planning for failure.  I immediately understood what she meant; I have many, many hours of project management training and experience and what makes a project truly successful is one that comprehended failure through risk analysis and on the strength of the resultant risk mitigation plan.  In other words, when planning a project, examine what can go wrong at each step and plan mitigating actions to prevent failure and monitoring steps to catch when the project immediately as it goes off the plan so you can have maximum time to recover.  Remember that a project plan has three dimensions:  Time, budget, and results.  All three must be planned for and achieved per that plan for the project to be successful.  Additionally, all three must be taken into account as we examine risks at each step:

• What can occur to cause this step to NOT come in on time?
• What can occur to cause this step to NOT come in on budget?
• What can occur to cause this step to not achieve the expected results?
• What actions can we take to make prevent these occurrences or to compensate if they do occur so we can achieve the desired results?

Employing this for our businesses
So how do we Plan for Failure for our businesses?  Here are some steps:

1. For each project, task set, production run, service offering, event, or any other important occurrence, evaluate the impact if it isn't on time, on budget, or meeting the expected results.  If the impact in minimal, then just do it.  If the impact is critical, then continue
2. Develop the plan, including the three W's for each step - WHO is responsible for doing WHAT, and WHEN.  Writing it down is key to assuring success
3. For each step, brainstorm what can go wrong with respect to Measurements, Materials, Method, Environment, Manpower, or Machine (see Cause and Effect Analysis) 
4. For each item identified that could go wrong, identify what can be done to eliminate the potential problem, what can be done to identify that the step is going wrong, and how to monitor to make sure the step is on track. 
5. Prioritize the mitigation steps

What about personal failures?  Follow the steps above as well!  This is planning for failure.

Using Failure to Succeed
Of course, you want to do everything you can NOT to fail.  However, it happens.  The key is to do everything you can to avoid failure and minimize the impact (through the above process), and then move on when it happens.  Here's how to do that.

Cut and run
The first thing to do is admit failure.  To whom?  Most importantly, yourself.  Many people hang onto their present course of action much too long and commit more time and effort, hoping things will turn around, versus declaring a loss and moving on.  Avoidance, in most cases, just makes the loss in the failure greater and delays getting back on course.  A "cut and run" strategy reduces the impact and speeds recovery.

If you're not failing, you're not learning - nor living up to your potential
There's safety in never exceeding limits.  However, a conservative approach - working well within the safe boundaries - sometimes can mean mediocre results.  Pushing limits can mean growth and excelling. This doesn't mean taking stupid risks, but includes planning for those risks (per above).  Additionally, developing a habit of learning from failures - analyzing what went wrong and then implementing actions to not repeat the failure based on the learning - is very valuable. 

Make the failure public
Selectively, tell others about your failures.  After admitting the failure to yourself, next share with others who are strategic business partners - those who care about you and from whom you can get business advice.  But don't just share the failure; share your learning and actions you are implementing to not repeat the failure.  Saying all this out loud makes it real.  Sharing it with others drives your commitment.

Share your story with your clients.  By sharing the story of how you got to where you are and what you do, you drive credibility.  Caution: This only works if you have learned and implemented the actions to avoid repeating mistakes!  However, taking this step means you will have your learning down very well!