I’m an old western buff. One of my favorite lines comes from a 1948 movie titled The Treasure of Sierra Madre where Humphrey Bogart is cornered by Mexican bandits and asks to see their Federales badges. The response from Gold Hat the bandit leader is classic . . ”Badges? We ain’t got no badges. We don’t need no badges. I don’t have to show you any stinking badges!” I heard a very similar line just the other day when I suggested to a company that it would be a value-added business step for them to implement a Business Continuity Plan. The response was . . .”We don’t need no Business Continuity Plan! It’s been in 30 years and we never had a disaster.”

What was obviously missing here is an understanding of the business benefits of establishing and maintaining a Business Continuity Plan. I believe the issue arises from the approach; Business Continuity seems to be tied to a defensive or protective strategy that is in turn linked to a disaster. None of this feels like an impelling reason to develop a plan. It feels like a real downer! Just like I believe that the Federales needed badges, companies both large and small, product or service-based, regional or global, need a Business Continuity Plan (BCP). Here’s why. . . .

Let’s begin with a definition of business continuity planning and the resulting “plan”:
“Business Continuity Planning is the creation and validation of a practiced logistical plan for how an organization will recover and restore critical functions within a predetermined time after a disaster or extended disruption”. 1 From this definition one can readily see that the critical words are . . .Plan, Recover, Restore, Disaster and Disruption. Now comes the key question; what disasters are we prepared to handle and is our company adequately prepared to “weather the storm”? Think – Haiti, Chili, Toyota, the Christmas Underwear Bomber . . .enough said. It should be noted that the industry’s approach to business continuity planning is based primarily on Information Technology (IT) systems and data. I broaden the scope and say what good is data if my management team, my facilities, my business partner, my critical supplier, etc. are no longer here. Like the pizza commercial . . . I suggest a Business-Business Continuity Plan that looks at the risks in each critical part of your company.

My case for recommending that every company create, implement, test and maintain a business continuity plan is quite simple; it make good business sense for your company and its value-added for both your company and your customers. It separates you from your competition and provides potential new customers with an added layer of assurance that your business is here to serve and to stay. With this in mind, let’s look at just two reasons why a business continuity plan is value-added:

1. Stability:
A recent Touche Ross study reported that the survival rate for companies without a business continuity plan that encounter a disaster is less than 10%. According to research by the University of Texas, only 6 percent of companies suffering from a catastrophic loss survive, while 43 percent never reopen and 51 percent close within two years. 2 Going through the process of developing a business continuity plan will identify where your organization, people and processes are weak and where you lack protection. Your business continuity plan can address these areas and will add value.

2. Financial:
International Data Corp. estimates that companies lose an average of $84,000 for every hour of downtime. 2 Iron Mountain has calculated the cost at $40,500 per hour. 3 Therefore, anything you can do to reduce or eliminate downtime saves money. A question that one needs to pose is what’s the cost of protecting against an identified risk or threat? Since it’s a good bet that a Business Continuity Plan has the potential to reduce the severity and probability of failure resulting from a business disaster, there should be some method of calculating the value of a business continuity program and resulting plan. There is! It called Annualized Loss Expectancy (ALE) and it’s determined by multiplying the Annual Rate of Occurrence (ARO) by the Single Loss Expectancy (SLE).

In closing, we know that the bandits were not the good guys and that they were not going to add any value to the situation Humphrey Bogart faced. We also know that Humphrey had a useful weapon at his disposal. Instead of a Winchester Model ’94, I recommend that your company have a Business Continuity Plan. Oh – one other thought. Corporate insurance is expensive. A business continuity plan can help your company reduce the cost of insurance and pump up the bottom line. Check it out with your agent.

1. http://en.wikipedia.org/wiki/Business_continuity_planning
2. https://iosafe.com/industry-stats
3. www.ironmountain.com/…/The-Business-Case-for-Disaster-Recovery-Planing–Calculating-the-Cost-of-Downtime.pdf

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Alan Lund is a Managing Partner at CORE Business Management Solutions. Alan holds a BS degree in mechanical engineering from Iowa State University and an MBA from the International University of Entreprenology. Alan can be reached alanlund@Corebms.com

The 1960’s western “The Magnificent Seven” is a classic.

I’ve often wondered, “Why seven?” Was five was not enough? Was it because they had a big budget and could afford Yul Brynner, Steve McQueen, Charles Bronson, James Colburn and the other three?

Or, was it because the marketing world is built around the number seven?  How many times have we all seen “Top Seven” lists?  Seven is a lot.  It’s four more than most of us can accomplish before we try to remember what the other things were that we were supposed to do.

Not to make a bad comparison, but only three of the Magnificent Seven survived. Therefore, I would propose “The Magnificent Three” as an approach to answer the question: “What does my company need to do to become profitable, diversify into new markets and to win the battle?”  Why three?  Because it always seems to take more than one, but less than seven.

Here are my Magnificent Three recommendations for business profitability, market growth and winning whatever battles you undertake:

1. Profitability:
   The last several years have been very difficult for many businesses due to the downturn in the economy which has lowered demand for many products and services while increases in material and operating costs have attacked from the expense side.These pressures have reduced, and in many cases, eliminated profits. Returning to profitability may not be possible under current legacy business models, strategies, cost structures and processes that remain unchanged from the previous days of high profitability.  In our current business environment, all business processes and activities must be evaluated in light of:

a. Is this a cost center or a profit center? If it’s a cost center, what can we do to avoid costs?
b. Which parts of this process support our company’s economic engine and what can we do to           eliminate waste or improve throughput?
c. Is the data or information going in and coming out of the process accurate? Not simply                     precise but truly accurate.
d. How is the process measured for efficiency and effectiveness? Remember – what gets                   measured gets improved!
e. What are the true “activity-based” costs associated with this process? These costs need to be         benchmarked against industry best-in-class to see where your company stands.

Answering these questions will put you on a path to understanding, and hopefully achieving improved profitability.

2. Market Diversification:
   Diversification is not easy. It involves several calculated steps that need to be controlled from the strategic, tactical and operational perspectives.  Every company needs to strategically review their current financial capabilities and financial strengths to determine both staying power and diversification funding.  That’s the first step.The next step is to identify and capitalize on the core strengths as a business entity.  This is uncovered by a thorough operations assessment review, including:

a. The integration of current technologies
b. The utilization of resources, i.e., people, equipment, facilities, etc.
c. The management team’s leadership skills and willingness to learn, transition and adapt
e. The true costs of the products and/or services provided. Costs by customer, product, service,         business unit, etc.

The third step is an industry analysis of current market(s), including specific strengths, weaknesses, opportunities and threats regarding market position, competition and your options for diversification including expanding products or services to existing “profitable” customers while identifying potential new markets and industries.  A key point to remember is that not all revenue is good revenue. It’s estimated that 30% of a company’s products, services and/or customers may not be profitable.  Back to an earlier point; business owners must know which products, services and customer that drive profitability within the company.

3. Winning the Battles:
   In The Art of War, Sun Tzu says “If you know your enemy and yourself, you will win every battle.” The initial battle plan is then to develop a clear and concise understanding of the company (complete steps one and two above) and to communicate your company‘s DNA to every employee.  What’s your DNA?  It’s . . “the aspect of the company that is very, very unlikely to change. . . .Financials rise and fall.  Employees come and go.  Procedures get rewritten, product lines are added or removed, marketing strategies get turned upside down. All these are important, but transient, realities of business life. However, there is something about a company that remains stubbornly the same throughout the vicissitudes of the business environment. We’re talking about the underlying character of the firm, in the sense one would speak of an individual’s character.”  That’s your DNA!

The parallel battle plan is to know your enemy; again, see steps one and two above.  Enemies include waste, non-profitable customers, poor performing processes, low or no margin products or services, etc.  You get the picture.

Summary:

Despite the odds against them, the DNA of The Magnificent Seven provided the grit and determination they needed to protect the villagers.  Four are killed; the villagers overcome their own fear and join the battle; the bandits are routed. In the same way, despite the odds against a company and despite the prevalence of competition, owners need to take control of business operations to achieve profitability, diversify into profitable markets and win the battles.

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Alan Lund is a Managing Partner at CORE Business Management Solutions. Alan holds a BS degree in mechanical engineering from Iowa State University and an MBA from the International University of Entreprenology.  Alan can be reached alanlund@Corebms.com

An e-mail blast from one of the sites I monitor caught my attention … Master the Art of Magnetism … “Always wanted Bill Clinton-like charisma, but thought you had to be born with it? Practice these three skills, and you just might surprise yourself.”

Guess what … I went ahead and read more. The article presented a concept that people like Bill Clinton have or emit a “Reality Distortion Field (RTD)” … an “aura of charisma, confidence, and persuasion, in which people report it almost impossible to avoid surrendering to the man and following his will when interacting face-to-face.” What is this? I need strategies that work. I’m trying to help companies prepare for 2015 and beyond. What’s needed to achieve just about any goal is a plan – not a thing called a Reality Distortion Field.

I’m old enough to remember Charles Atlas and the ads where the skinny guy had sand kicked in his face by the beach bully. The rest of this sand-in-your-face story was straightforward … the skinny guy establishes a plan, works his plan, measures his plan progress and makes the changes necessary to address the beach bully. It’s not warm and fuzzy; it’s no RTD. It’s not aura or charisma. It’s having and working a plan.

What’s your Beach Bully Business Plan for 2015? Here is my recommended list of questions that you should contemplate in your business planning initiatives:

1. What are the Top 3 Risks that we could encounter in 2015?
2. Are we properly positioned in the market to achieve our growth projections?
3. Do we know our costs and how they impact our economic engine?
4. Where are we on the Business Innovation Curve?
5. Do we have a Business Continuity strategy to address more than just data?
6. How far behind the technology utilization curve are we?
7. What’s our plan to strengthen our supplier base and our customer relationships?
8. Do we have solid Web and mobile communication strategies?
9. If Cash is King, do we have enough in reserve to survive bumps in the road?
10. What are the Early Warning Indicators that will inform us of pending issues?

Before you launch into developing a 100 page comprehensive business plan, I recommend you take the above questions and ask your management team for their inputs. What I recommend is that you put each question on a single sheet of paper and ask your management team to provide their specific recommendations on how your business should address the question.

Once the team has completed this initial step, conduct a brainstorming work session to prioritize or rank the questions based on the impact this issue could have on your company.

Select the top three prioritized “opportunities” and make a first pass at adding the detail of who, what, when, where, how, resources needed, projected costs to implement, etc. With this step completed, assign a champion and support team for each opportunity. Set specific target dates and action steps for each team (that could be only one or two people) to complete a more thorough analysis of what will be done to achieve the expected results. Conduct focused, bi-weekly review meetings (I suggest lunch meetings where the company buys) to review the status and to identify any issues that are holding up progress. I recommend spending no more than 15 minutes per opportunity. These meetings are to keep the program on track and to identify areas where additional assistance or resources may be needed; these are not detailed problem solving work sessions. The team does that work.

The typical end result is that your team will accomplish 85 percent of what was assigned. Don’t pile on more. Take the improvements and make your company better prepared and more profitable for 2015. In the normal business world, you can always ask for and receive 10 percent additional energy from your management team over a designated time frame. After all, I just looked outside the window and fall is rapidly approaching. Soon there will no more golf, canoeing, softball, etc. to interfere.

I have developed several forms that can assist you and your team. Let me know and I’ll send them to you.

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Alan Lund is a Managing Partner at CORE Business Management Solutions. Alan holds a BS degree in mechanical engineering from Iowa State University and an MBA from the International University of Entreprenology.  Alan can be reached alanlund@Corebms.com