Last night while sequestered in my home, I was watching “Heat,” an old movie starring Al Pacino and Robert DeNiro. During a scene in a restaurant, the two are talking and the good cop (Pacino) asks the bad guy (DeNiro): “So, during a heist, if the heat becomes too intense, are you prepared to give up your relationships, everything, to get out?” DeNiro replies, “Yes. This is the game. To win requires discipline.”
No matter what your business, you need discipline. I’ve not always been as good at this as I should have been. For instance, I could have made more money if I dropped products that had low sales and focused more on the 20 percent that make up 80 percent of the revenues. My “method to the madness” had to do with being the world’s leading source of “all things connect.” I felt that it was worth the price to offer selection in exchange for bragging rights; however, the “pencil pushers” constantly reminded me of my folly.
One of the most difficult tasks in the world of business that requires a serious amount of discipline is preparing sales forecasts and the financial budget for the coming year. It requires a tremendous amount of tedium to get it “close,” and at the end of the day, it’s assured that you will never get it 100 percent right. But that’s not the point.
The point is goal setting. Without a target, how can you even come close to hitting it? With sales forecasts, you can then predict production requirements, part orders, costs of goods, expenses, and ultimately, corporate profitability. It also gives the sales team a sense of their anticipated commissions, which of course drives their egos and fills their pocketbooks. It’s also important to provide the tools to get the job done such as investing in R&D, advertising, marketing, support staff and so on. The most important thing I learned over the years was to make the budget realistic, yet aggressive.
Once a sale has been made, another level of discipline comes into play: You have to get paid. This means establishing guidelines with the accounting department. I recall the order desk getting calls from clients saying that they didn’t have to fill out a credit application – “Peter knows me!”
But I never swayed in this policy. To open an account, we did thorough credit checks and then limited the available dollars, only releasing so much product at a time. Big accounts will sometimes drag you out because they understand the value of using your cash instead of their bank’s credit.
We also had a rule whereby after 45 days, we would stop shipping products. Forget about the promises – the shipments were made in good faith so we should be respected and treated the same by receiving payment. The only card in our hand was the demand for the products.
Years ago, I recall one of our salespeople going to visit our biggest customer, with the sales manager waiting outside in the car. The sales call included meeting up with the buyers and collecting an overdue payment from the accounting department.
The salesperson went in, did his pitch, but returned to the car without a payment. It was late Friday and the salesperson was distraught because he had a flight to catch, but after about 30 minutes, he finally came out with a check in hand.
It also takes discipline to keep costs under control. For instance, we never purchased new office furniture. Everything was high quality yet used. No one cares if you have a fancy gold leaf boardroom table. In fact, bankers and other financers are trained to look past all of this. The only thing they care about is your bottom line.
The same applies to trade shows. Having a fancy booth can be impressive, but at the end of the day, what really matters is setting appointments with clients, showing them the new products and then generating orders. Over years of exhibiting at the NAMM Show, we went from hotel rooms to renting a large house for our team. The house wasn’t fancy but it was close to the convention center and its far lower cost enabled us to save a pile of money.
Breakfast in a hotel can easily cost $25 and dinner in a restaurant can be $75 per person when you figure in alcohol. Multiply this by 10 staff members and 7 days, and you’ve just spent $7,000! Going to the store to shop takes time, but it’s not difficult to see how a ton of money can be saved by taking this approach.
The other upside is that it nurtures a tremendous amount of comradery by residing in close quarters. It’s not always easy – you have to cook and clean up, and for some this is a real chore.
In this day of uncertainty, there’s never been a greater need to be disciplined. Cost cutting to stay in business is mandatory.
However, if you’re smart, you can take advantage. For instance, you can be certain that many of your competitors will be culling expenses. During the financial meltdown several years ago, everyone stopped advertising. I did the opposite. By spending and paying my bills, I was able to negotiate extra ad space without the extra cost. This elevated the company’s profile, and once the dust settled, we enjoyed a huge jump in the market.
All it takes is discipline.