There’s more than one way for a company to “go green.” In this month’s article, I would like to redefine what “going green” should mean to every C-Level executive. To set the stage for what I am talking about, ask yourself the following questions: Beyond having a profitable business, what else is important to you? How would you define the ideal environment for your business (and I am speaking of an internal business environment)? Do you enjoy what you are doing and the way you’re doing it?
When we work with our clients, we stress the importance of not only being profitable, but also enjoying the journey. When there is profitability, plus a sense of purpose and enjoyment in our business, we create an environment where most of our employees will love coming to work. For me, that is what “going green” is all about.
Before I get too far into this article, I need to establish a basis of understanding related to the “psychology of color” for those who may not be aware of this. Consider the following:
►Red is the most emotionally intense color, red stimulates a faster heartbeat and breathing. One thing that is sure to get any C-Level executive’s heart beating fast is to see their company’s profit and loss statement that depicts the business losing money or operating “in the red.” It is an attention-getting color which is why the color “red” is used for depicting losses.
►Black is the color of authority and power. It is popular in fashion because it makes people appear thinner and therefore more attractive. It is stylish and timeless. Likewise, operating a business “in the black” is considered “stylish” by any standard.
►Green is the easiest color on the eye and reportedly can improve vision. It is a calming and refreshing color. Isn’t it interesting that our U.S. currency is shades of green. Green symbolizes nature, and studies show that it is the most conservative color and one that implies wealth.
While there are numerous other colors included in the “psychology of colors,” these are the only ones of importance as it relates to this article.
We all know what it means when a company is “in the red” and when a company is “in the black.” But what I want to introduce to you as you read this article is another dimension of how to think about your business in the financial sense of the word. It is a dimension beyond just “operating in the black.” It is the concept of operating your business in the “green” … beyond just being profitable each month.
As a leading national business management consulting firm with a prominent mergers and acquisition (M&A) division, we regularly receive calls from business owners wanting to sell their businesses. When we probe the reasons why they want to sell, we commonly hear things like:
►“I have been struggling with my business, and I am tired and want out.”
►“I don’t own this business, this business owns me, and I want my life back!”
►“This has ceased to be fun … I want to do something different.”
On a side note … would you agree with me if I said any company like that would not be considered “green?” They usually are marginally profitable or not profitable at all. They are not fun to go into every day of each week and none of the employees are relaxed, calm or feeling refreshed. It is more like the life is being drained out of them. Heck, most of us have worked at a place like that and never would go back to that kind of existence because that is all it is … a bare bones existence.
When I get a call from a business owner like this telling me they want to sell their business for one of the above reasons, I always recommend that we first start working on the business to get the business turned around at least enough so the business is attractive to someone looking to purchase a company. This is classic “turnaround management” stuff that we do, day-in and day-out with our consulting business. What is amazing is that as soon as we get the business turned around and operating in the black, and even “operating in the green,” the business owner who retained us is no longer interested in selling the company. Hey, who can blame them! Anyone that has owned and operated a business that is operating beyond just being “in the black,” but is now operating “in the green” can tell you that it is fun to come to work each and every day and it is something you want to keep. Few things are as rewarding as owning and operating a business at which you are making money, living life to the fullest and creating an environment where there is great “quality of life” for yourself, and hopefully, for your employees.
For many in the mortgage industry, last year was a very good year financially, but not many operated “in the green” … it was not an enjoyable journey. And, as we look into what the rest of 2010 has in store for us, we know the business environment is growing increasingly challenging. We are dealing with higher capital requirements, higher interest rates, decreasing home sales, fewer refinances and a tsunami of new regulations coming at us … and now, an increase in healthcare costs! Yet, with all of that (and I am going to suggest because of all that), I see more opportunity than ever to be outrageously successful in the months and years ahead.
Keep in mind what I have been saying for the past six months … “more money will be made in the next five years (by the few that survive) than was made by all the companies that have operated in the previous 25 years.” And, I will add to this bold statement, that the vast majority of those companies will not just be operating “in the black,” but will be operating “in the green.”
So, how does a business owner start operating in the green? Here are six basic essentials necessary to do so.
1. Get a plan for what is coming
I am sure that you’ve heard the expression, “A failure to plan is a plan to fail.” What is coming at our industry is going to require diligent planning. My recommendation is for you to not do this in a vacuum, but rather, hire industry experts that have a good understanding of the “lay of the land” to help you chart your course. While there are plans that everyone should adopt, each plan is unique to each company based upon their business model.
2. Manage by the numbers
Whether a business is expanding or contracting, any successful business owner will tell you that it is essential that you know your numbers, your income and expense numbers, on a month-to-month basis. Borrowing from a religious bumper sticker I saw, consider this: “Know (your) numbers, know (your) business” and conversely “No numbers, no business.” You would be surprised how few business owners truly know their numbers, much less manage by their numbers. Don’t make that mistake with your business. Don’t be afraid to get consulting firms like ours involved with you to help you focus on the right numbers.
3. Keep your costs variable as much as possible
Fixed costs can kill your business in a contracting or volatile market. The more elastic you can make your expenses, the easier it will be to manage your profitability. Remember your income has always been the variable number. Make sure your expense numbers are as well. Outsourcing aspects of your operations like bookkeeping/accounting or even back office fulfillment can make such a difference in bottom line.
4. Stick with your strengths
A wise person knows their strengths and an even wiser person knows their weaknesses. Unless you are an accountant, you probably didn’t start your business because your strength was bookkeeping and accounting. You most likely started your business because you enjoyed originating loans, helping people get into homes and, yes, making money.
5. Manage to your strength, hire to your weakness
Focus on that which you do well. If your strength is originating loans, why not hire someone to do your bookkeeping/accounting? Hire someone to handle that which you either don’t enjoy doing or you are not good at … usually they are one and the same. However, doing so will not abdicate your responsibility for you to “manage by the numbers (see number two above).
6. Make sure your business is on a secure foundation
There are stormy days ahead for our industry, and for our economy. Invest the time now to make sure your business is on a solid foundation, so when the climate turns ugly, you and your company will be “operating green” … safe, calm, relaxed and secure.
David Lykken is president, mortgage strategies and managing partner with Mortgage Banking Solutions. David has more than 35 years of industry experience and has garnered a national reputation. David has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. To listen to author David Lykken’s online radio show, log on to www.blogtalkradio.com and type in “Lykken on Lending” in the “Search” box.
