THE PROBLEM OF THE "TECHNICIAN" BUSINESS!

Reputations are built on a business that does excellent work! The carpenter whose fine crafstmanship wonders customers, the accountant that finds every last deduction worth finding or the lawyer whose counsel is like the wisdom of Solomon. Perhaps, it seems that's all you need to build a successful business.

Actually, there is more..fundamentally a business involves risk so you have to have an entrepreneurial bent in your bones. Also, systems need to be in place and the business needs to be organized, as well, just to name a few!  Three hats, famous author Michael Gerber says, are needed in his classic book, "The E-Myth." 

Not everyone possesses all three hats in equal amounts, but it's important to keep in mind that all three are needed!

Some of the problems of building a business on technical skill alone, include:

• Lost sales can result from not taking advantage of new opportunities for growth or perhaps in not being organized enough to meet the time pressures of customers 
• Poor decisions can result from such a business, if accounting records are neglected. You may be popular but not profitable. If your eyes see a regularly-prepared income statement or statement of cash flows, operational problems would be seen before they become disasters. A budget would reveal the need for a coming cash flow crunch!
• Without a strategic look ahead at environmental threats like zoning issues or lost suppliers, business could come to a halt. One concrete contractor had to dump concrete rubble from clients and the city dump wasn't a cost-effective option. A major sand/ gravel operator and highway contractor suddenly closed its grounds to dumping, turning the disposal of this rubble into a sudden crisis. Without thinking ahead or doing some problem solving, this problem could kill or seriously hamper such a business!
• High employee turnover! The technician business is typically dominated by a demanding technician, or so it would seem. Such a person is sometimes unwilling to see the need to be a manager. Managers delegate! Technicians produce! The problem becomes obvious! Good people don't like to be continually second-guessed on how they ring out a rag, spread chlorine over a swimming pool, use a Skil-Saw, how or whether they consult the Internal Revenue Code, or what they pay for a used car. 
• If a technician does have to become a manager or CEO of a growing company, quality can suffer because training is not always a priority for the newly hired techs! They are often told to jump in and do the work because the owner doesn't like, or have the patience, to train!
• Producers can be passive procrastinators about other aspects of the business, since human nature often avoids what we aren't good at!

SIX TRENDS OF NOTE IN 2014

Central to the mission at O'Hara Business Strategies, are "strategies."  Analyzing and identifying trends facing leaders, businesses and other organizations is indeed part of a strategic approach. Trends are typically organized as:

• Political,
• Economic,
• Social & Demographic, 
• Spiritual, and 
• Technological.

One of my 2014 favorited Twitter tweets, addressed a major technological and economic trend, cloud-based computing (and mobile computing), "In 2014, cloud-based computing grew as a key technology trend. For example, Salesforce.com. a pioneer in cloud computing, used the "No Software" symbol boldly!"  Cloud-based computing offered the benefit of avoiding the computer crashes possible with a home desktop computer, as well as allowing access to songs, files and sales presentations, on the go.

Five more key 2014 trends included:
1) The GOP won big in November's mid-term elections, taking control of the U.S. Senate. However, President Obama was unfazed, seeming to double down with executive actions on immigration and toward normalizing relations with Cuba. Similarly, "gay" marriage bans, largely enacted by popular vote, across the USA have fallen like dominoes. Objectively, a curious inconsistency appeared in American politics in 2014. The rule of law, the will of the American people and a Judeo-Christian worldview appeared to be taking a back seat to an increasingly powerful executive branch in Washington, D.C. and un-elected judges, with an aggressively secular worldview.  
2) Radical, violent Islam advanced around the world with Isis in Syria/Iraq, the Taliban's resurgence in Afghanistan, and renewed terrorist attacks, beheadings and kidnappings in Great Britain, the USA, Israel and Nigeria.
3) Widespread protests vs. perceived police abuse occurred despite objective, grand jury evidence to the contrary. These events illustrated an increasing hostility to the rule of law or the police, in general. Although, police abuse can occur! These protests along with "gay marriage" ban reversals and the rise of NDOs (Non-Discrimination Ordinances) across the country are evidence of changing values in the USA. Some may even consider such events to show the rise of privileged groups in America! 
4) On a global basis, the IMF apparently calculated that China would have the world's largest economy by year's end, ousting the USA from the #1 position it has held since Ulysses S. Grant was President in the 1870s. Also, Russia, despite being bruised by declining oil prices by year's end, sought to increase its military influence earlier in 2014. Also, the USA seemed to be appeasing enemies like Iran (in nuclear talks) and North Korea (by not providing strong gov't support to Sony after being cyber-attacked due to the satirical movie, "The Interview") while increasing hostility toward long-time ally, Israel for settlement activity. These events added to the sense that America's influence was waning globally!
5) Oil prices dropped to less than $60/barrel late in 2014, stressing nations like Russia and Venezuela and American oil producers in Texas and North Dakota. However, the price breaks were welcome news to American consumers. as well as energy importers like China and India. What will be the impact in 2015? Could be interesting!

6 KEY BENEFITS OF BUILDING SYSTEMS by Dave Lavinsky of the Growthink Blog with additional thoughts by  Daniel O'Hara added in italics. Used under the Fair Use Rules of the U.S. Copyright Law. Written by Dave Lavinsky on Thursday, February 10, 2011 ***Please read Mr. Lavinsky's full article using the link at the end of this positing. This was an excellent article on the benefits of building systems. Mr. Lavinsky, of the Growthink blog, used the illustration of building a system for what may seem to be the most mundane of tasks, "how to handle inbound phone calls." Lavinsky showed the benefits of systems, even for answering the phone with these 6 benefits: 1) Creating the system forces you to think through the  process and improve it. The "simple" phone answering system addresses key questions, some of the questions he noted included: * What customer information should you collect when they call (e.g., name, email address, etc.)? * Where should this information be inputted (e.g.., CRM,  database, forms)? * What other questions should be asked of the customer? * Under what circumstances should the customer be transferred to someone else? To whom should the caller be transferred under various situations? * How many times should the phone ring before it goes to voice mail? * What should the voice mail message(s) say? * What message should the listener hear when waiting for either a live person or voice mail? A concentration of effort in one area, causes brainstorming about issues that need to be considered. As you can see, when you focus on this one activity, you are forced to really think through the issue and make the best decisions. Interesting...it's important to note that if one company felt it was worthwhile to to invest the time and resources to have a  "phone answering system", it drives the point home even  more about the necessity of having a solid accounting  or marketing system in place, in a business.  2. Having the system in place allows for improved and  consistent performance.  One of the results of the system development process is creating flowcharts that show each piece of the system. These flowcharts are given to all the relevant employees and posted on their walls. This allows all the employees to follow the proper procedures, giving your company consistent, high-quality performance on the relevant tasks. Michael Gerber makes the same point in his book, "The E-Myth" about developing business systems. Additionally, training is made more consistent, veteran employees continually need to "stay on their toes" and not rest on years of experience, and new employees have an  approved "cookbook", a guide to follow rather than relying on the hearsay of others.  3. Having the system in place allows you to quickly integrate new hires into your business. Likewise, the system and flowcharts make it very easy for new hires to see their place and roles within the organization and hit the ground running. Putting a dollar value on this benefit of systems is, in and of itself, a powerful benefit of making the investment! 4. Having the system in place allows you to easily come  up with and implement new ideas. Once you have the system flowchart, it's very easy to come up with new ideas. Ideas like "What if we bypass this activity and go straight to this other action?" become common. And implementing these ideas is simple since you can easily pinpoint which elements in the flowchart are affected. 5. Having the system allows you the entrepreneur/ manager/owner/etc. to a) take more time off, and/or b)  spend more time on higher value-added activities. Creating systems is classic "working on" versus "working in" your business, another reference to Michael Gerber's book, "The E-Myth." Once the systems are created and in place, the activities are performed nearly on auto-pilot. You don't have to waste time and energy in performing and/or actively managing them. I have to respectfully disagree with Mr. Lavinsky here. Systems are great but it is highly possible for a manager to  ignore or circumvert them! They don't run on auto-pilot! Years ago, working at a franchise restaurant, the  dishwashing and food storage procedures omitted proscribed corporate steps.When the corporate inspector  arrived, things got tricky!  6. Having systems dramatically increases the equity  value of your business. Once your company has lots of systems in place, it instantly becomes much more valuable to an acquirer. That's because the acquirer knows your business will run smoothly after acquisition. If you have a small business this is an excellent point!  Sometimes selling the benefits of systems to a buyer may be necessary.  A business buyer also knows that new hires can quickly be added into the system so they can expand your business quickly. Furthermore, the systems you developed could help the acquirer expand their own business. So, you need to start thinking about every key aspect of your business as a system. For example, do you have a system for your internet marketing? Do you have landing pages designed to maximize conversions? Do you have a system to test these pages frequently? Do you have follow-up email campaigns in place based on actions customers take online? Etc. Etc. And do you have sales systems? Do you have an established process to handle new leads? To build rapport? Etc. And what about HR systems, and production systems, etc. While building systems takes time and often does not immediately put cash in your pocket, the six key benefits noted above will pay for themselves over and over again and are definitely worth doing. So start systematizing your business today.

Source:
Article by Dave Lavinsky at
www.growthink.com/content/6-key-benefits-building-systems

GREAT COACHING QUOTES

FOR SMALL BUSINESSES

"...the quickly growing wave of coaching relationships that are helping small-business owners improve their business skills, recalibrate their approaches to management, and, often, totally reboot and re-balance themselves as leaders on the job and in the home and community."
Dale D. Bliss, Nation's Business

"Most leaders like executive coaching because: they receive direct one-on-one assistance from someone they respect; they don't have to leave their offices; it fits their time frames and schedules; they can see fast results, if they're dedicated." Training & Development.

“Bob Wright, an executive coach, says his clients are needing him even more during the downturn, tough times are a great opportunity for those businesses who can make the hard, right decisions during difficult transition and adjustment periods and that's what coaching is all about, learning how to change and grow.”

Management Today

"Iron sharpens iron, So one man sharpens another."

Proverbs 27:17 NASB

"It's not comfortable to have someone constantly telling you how you can be better. But it's very hard to get better on your own."

David S. Pottruck, co-CEO of Charles Schwab & Co.

"Once used to bolster troubled staffers, coaching now is part of the standard leadership development training for elite executives and talented up-and-comers at IBM, Motorola, J.P. Morgan, Chase, and Hewlett Packard. These companies are discreetly giving their best prospects what star athletes have long had: a trusted adviser to help reach their goals."
CNN.com, 5/28/2001

“I absolutely believe that people, unless coached, never reach their maximum capabilities”

Bob Nardelli, CEO, Home Depot

“Coaching simply speeds up a process of change that would most likely occur anyway if an individual had enough time. Without a coaching program that forces a client to focus and make time, people sometimes miss the real issues they need to focus on.”

The Ivy Business Journal, September-October 2000.

“I'll bet most of the companies that are in life-or-death battles got into that kind of trouble because they didn't pay enough attention to developing their leaders.”

Wayne Calloway, Chairman, Pepsico Inc.

"A plan in the heart of a man is like deep water, But a man of understanding draws it out."
Proverbs 20:5 NASB

*Source of some quotes from www.sam101.com, a Coachville web site. Used under the Fair Use Rules of the U.S. Copyright Law.

SELECTING THE OPTIMAL BUSINESS ENTITY FORM....

Selecting the best form of business is a key business decision, that should be considered thoughtfully and with professional advice. O'Hara Business Strategies would be happy to help you walk through this process whether starting a new business or at a point of transition.

The following seven general areas of concern should be considered when selecting the right entity:

ELECTIONS / REGULATIONS - The S Corporation requires federal election on Form 2553. Other entities are governed. created by state statute. Depending on elections made by a limited liability company (LLC) and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner’s tax return (a disregarded entity”).  See the following link for more information on IRS elections for LLCs:
http://www.irs.gov/Individuals/Self-Employed/LLC-Filing-as-a-Corporation-or-Partnership

CAPITALIZATION
The amount of capital that can be raised varies among the business entities. A sole proprietorship is limited to capital infusions and debt raised by the owner. Partnerships are the same except that the pool of capital is increased by the number and capability of the partners. Corporations offer still more options including selling stock or issuing bonds.

ADMINISTRATIVE BURDEN
As far as administrative burden, the least burden generally falls to a proprietorship while corporations have the greatest burden. Corporations have to file an articles of incorporation, they need by-laws, file tax returns distinct from the shareholders, hold annual meetings and so forth. Partnerships also can be complex due to the potential for disagreement among partners and the need to plan for a partner's death or withdrawl from the partnership.

LIABILITY
For liability considerations, a sole proprietorship's owner is responsible for the business' liabilities while a LLC, S corporation and corporation limit such liability. In a general partnership, each partner can bind the partnership and the other partners by his/her actions so it can be riskier, from a liability perspective, than a proprietorship.

MANAGEMENT/ CONTROL
Proprietorships again offer simplicity, flexibility and control. However, they are limited in terms of management resources to the skills/ abilities of the owner. Partnerships and corporations, by their increased numbers involved in management, offer more expertise. However, the downside is the potential for increased strife among partners or shareholders.

CONTINUITY & TRANSFERABILITY OF OWNERSHIP
Proprietorships are not a legal entity so they don't continue after the death of the owner. The assets of the business, not the business itself, are then sold. Partnerships are also of limited duration and it is dissolves upon the death or withdrawl of a partner. Corporations, a legal entity, have an indefinite life. Transferability is, in theory possible, but in practice it may be limited due to a lack of a ready market for willing new shareholders.

TAX CONSIDERATIONS
There are a variety of tax issues that come into play when choosing a legal form of entity such as compensation, self-employment tax, taxable years, tax rates and fringe benefits.  One issue in particular, as an example, is that all net income is treated as compensation for a proprietor and subject to self-employment tax. The limited liability company has gained favor recently. However, it should be noted that compared to an S corporation, the LLC also requires net income from the business to pass through as compensation, making all net income subject to self-employment tax. On the other hand, in a S corp, a reasonable amount of net income must be considered compensation to shareholders involved in management, and subject to self-income tax, but the remaining net income is passed through to the owner's Schedule E, not subject to self-employment tax.

Again, the choice of a legal entity can be complex. O'Hara Business Strategies would be glad to help in this area!

10 TOP TAX PLANNING STRATEGIES

 

With tax season just around the corner, here are ten common, and effective tax strategies for business owners:

 

1) Keep good, up-to-date accounting records so you know where you are at the end of the year. Without, good records it is difficult to do intelligent tax planning!
 

2) Defer business income to next year and accelerate business expenses, when practical, into the current year.

 

3) Start a business! Businesses offer deductions for things like travel, car use, depreciation, office supplies, travel, vacations, equipment & furniture and other items used for ordinary and necessary business use. However, the business does need to be carried on with the expectation of being profitable.
 

4) Don't be surprised by self-employment taxes! I refer you back to #1 above (keep good records). You may make a rough estimate that you have no income tax because of high itemized deductions. However, net income from a Schedule C business (sole proprietorship) is still subject to the 15.3% tax, starting in 2013. Consider using rent to business owners as income, if reasonable and appropriate, to avoid compensation-related tax, i.e. the self-employment tax. //See this link for more info on the self-employment tax:
http://www.irs.gov/publications/p225/ch12.html
  

5) Maximize unrealized income. To accumulate wealth and reduce the tax bite, invest in assets that produce income that is not currently taxable. The tax laws operate on the realization principle, where gains are not taxed until the property is sold/disposed of, or realized. Therefore, investments in real estate, rare coins & art, stocks and other investments can delay taxes while they appreciate in value. 

 

 

6) Be aware that there are restrictions on depreciation allowed for listed property (property that is typically used for personal use) like cars, boats. computers, etc. used primarily for personal use. Also, use accelerated depreciation such as the the Section 179 and bonus depreciation deduction, when allowable. See the following link for more information on the Section 179 and bonus depreciation write-off:
http://www.section179.org/section_179_faqs.html
  

7) Consider estate and gift tax issues, especially in closely-held companies. Also, consider the possibility of splitting income among family members, especially to those with lower tax rates.

 

8) Consider and select the best legal form of doing business in your situation.
The decision should be considered carefully with your tax adviser. Some issues to consider are simplicity, flexibility, pass-through of business profits, centralization of management, free transferability of ownership interests, reporting requirements, limited liability, number of owners allowed, ease of selecting a fiscal year end, self-employment taxes, and double taxation of earnings.   

 

9) Use the home office deduction, if you qualify, to allocate the home office portion of your home's expenses to your business. Examples of indirect expenses that can be allocable to home office use include home mortgage interest, real property taxes, homeowners insurance, and general home repair.  Check out this link for more information on the home office deduction:  http://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Home-Office-Deduction

 

10) Use auto expenses effectively. As noted previously, business owners can deduct business use of a car. Costs are divided between local transportation (commuting is not allowable) and overnight travel expenses. You can elect to take either actual car expenses or the standard mileage rate, which was 56.5 cents/mile in 2013 and 56 cents/mile in 2014 for business miles driven. The rules for car expenses are complex and require good records.

 



NEATNESS = PEACE OF MIND...

...and is a contributing factor to success!

Having a background as a bean counter, being a bit compulsive about neatness and organization should come as no surprise. It makes me feel so much better, more confident, more relaxed. It is such a time saver in finding things, in contributing to higher productivity because of a more focused mind, and with increased peace of mind on and off the job.

Why increased peace of mind? Thinking about difficult projects--at hand or upcoming--I found if I couldn't remember where I put something, or where a file was on my computer, it was a stressor.  On the other hand, a neat workplace often ends those thoughts quickly, and I can go back to life!

Neatness typically means systems are in place. It means concentration on the work at hand can be intense and focused, tools needed are at hand or exactly where they should be! The frustration of losing focus, getting bogged down is eliminated! Surgeons, mechanics, accountants, executives...all rely on a neat, organized work place or neat, organized assistants to concentrate effectively.

Working for my father's construction company as a teen and into college, he would often repeat his father Hugh's mantra. Grandpa Hugh, a carpenter for the Northern Pacific Railroad back in the day, apparently regularly remarked, "a place for everything and everything in its place." While perhaps irritating at the time, later experiences working with carpenters or foremen that couldn't find their tools or allowed a sloppy job site, proved very frustrating and unpleasant. Builders with a commitment or near obsession to a clean job site, I observed, tended to be more successful, professional and efficient.  Those with the sloppier sites tended to be angrier, less successful and micro-managers!

Robert Irvine from TV's "Restaurant Impossible" show often attacks messiness with a passion on his show. One Florida diner, the Soup to Nuts Diner, was termed "dangerously dirty" by Robert, and he refused to allow anyone to eat food from their kitchen. It was a clear case where physical messiness also translated to a messy financial situation, as Soup to Nuts was losing money as well. The fact is, a business that is sloppy in appearance often translates into a business that is sloppy in other areas as well.

Finally, a story B. Eugene Griessman shared in his excellent book, "Time Tactics of Very Successful People" about the creator of the famed Peanuts cartoon (Charlie Brown, Snoppy and the gang), CharlesSchultz. Greissman noted that despite what he had expected from such a creative genius, Schultz's office was clean and tools of his craft were perfectly in order. When Greissman asked about it, Schultz replied, "I like things neat."

While perhaps overlooked, don't underestimate the power of neatness in a prosperous business!

DISCERNING THE VALUE OF TIME!

A common time management tactic is to put a value on your time--like the billing rate  professionals typically use.  One reason is that it helps to see time as having value--so it can be evaluated and managed effectively. Putting a value on time helps bring a clarity about certain tasks, whether they're high-value or low-value activities.

Fundamentally, high-value or high-payoff (HIPO) tasks are often characterized by the following:

• They require a pro-active, conscious decision to do because they can easily be "crowded out" by more urgent, low-payoff (LOPO) tasks.
• They often require an environment free from distractions, or private time. A willingness to pull back from mundane routines to work smart, not hard.
• Because they are sometimes difficult, uncomfortable, or easy to put off, it helps to give yourself a reward for doing them.
• They often require the development of new skills or at least honing existing ones.
• They require self-discipline, intensity and commitment.
• They require a long-term focus and they move you toward your goals.
• They often require preparation and planning.

Low-value or low-payoff tasks (LOPOs), on the other hand, look more like this:

• They are often urgent, but they can become HIPOs if ignored or dumped, in some cases. Most of the time someone needs to do them unless they can be safely eliminated.
• They often offer little payoff in terms of reaching your major goals and mission.
• They can expand easily, taking more time, and proving Parkinson's Law which says "work expands so as to fill the time available for its completion."
• Executives focused on LOPOs are often oblivious to the value of time.
• They can be popular and pleasant to do.
• They are often done, or done in a certain way, because of tradition and a "that's the way we've always done things" culture in a business.
• They can be deceptive, because they keep you busy but don't make you effective.

However, through an on-going coaching and accountability process with O'Hara Business Strategies and over time, a business owner's ability to discern the value of time is enhanced and the client learns to discriminate between high-value and low-value tasks. As they focus more time and energy on leadership, profits and strategic business-development matters, their profits soar as well. By doing the right type of work, they learn to work smarter, not harder.

HOW DOES YOUR

CUSTOMER SERVICE RATE?

  

Three words can quickly evaluate customer service--rude, indifferent or hospitable. 

 
 

Receiving hospitality at a business is truly refreshing. Hospitable means "cordial and generous to guests". Let me outline how this looks:

 

• As previously noted, a hearty, friendly and sincere greeting!
• Friendly staff and a friendly, involved & helpful management.
• Empowered staff...The Nordstrom (Department Store) Way shows the direct link between empowering your employees and creating a long-term relationship with your customers. 
• Sales staff that build rapport well, are focused on the customer, provide excellent product knowledge and close effortlessly.
• Cashiers that process transactions painlessly, helpfully and without drama.
• Service after the sale & service handling complaints that avoid hard feelings, make friends. 

Indifference....a few different meanings here but the one I like from Webster's is "having no particular interest or concern; apathetic." The definition says a lot but here's how it might look...

•  Restaurant servers texting on their cell phones while customers wait to be seated.
•  Staff & management that are unavailable, uninterested in helping customers. 
•  Sales staff that don't ask for or use a customer's first name and avoid eye contact.
•  Distracted staff.

And then there comes, rude. "Ill-mannered ; discourteous." Another definition, a little humorous is" sudden and jarring." I would add hostile, malicious, irritating, and "too much drama." This environment can't just be blamed on staff, but it can reveal management problems as well!

• Giving priority to phone calls while in-person customers wait.
• Argumentative, overbearing and antagonizing sales staff.
• Excessively unpleasant or being "stressed out"
• Feeding a customer's anger instead of calming it.

 

 

 



THE PERILS OF EXCESSIVE INVENTORY

 

 

Inventory! Accountants classify it as a current asset because it is supposed to be converted to cash within a year. It is an investment and should be treated as one.

  

Problem is, too often business owners and managers aren't aware of all costs involved with inventory. The acquisition cost is obvious enough! Ordering costs like lost quantity discounts, clerical costs, are readily seen by most managers. Also, the stock out costs of ticked-off customers that have to wait or another variety--being chewed out by a business owner are likewise within the consciousness of managers in charge of purchasing decisions. All are costs and all are very real! But perhaps overstated or excessively over-emphasized. Ordering and stock out costs have risk involved--the risk of being humiliated, losing a customer, losing out on a great quantity discount. I don't want to understate these risks!

 

However, my focus in this post, is to shed some light on the reality of carrying costs. Why? Because they carrying costs typically behave in opposition to ordering and stock out costs. And, they are in my observation and experience, typically ignored or understated.

 

Accounting textbooks include the more obvious examples of carrying costs--storage space/rent, breakage, theft, obsolescence, insurance, personal property taxes as carrying costs. Sometimes these can be significant ! 

 

Also mentioned as a carrying cost is the cost of capital of inventory.  This is where the problem begins. Cost of capital is kind of like what economists call opportunity costs--the value of the benefit that is forgone by choosing one alternative rather than another. It is less obvious, less clear to measure. Simply put, since inventory is an investment, it needs to generate a return on investment. If this cost of capital isn't measured or taken into account by managers, the temptation is to overbuy inventory. If the simple fact that inventory is an investment to maximized rather than a size to be prized is ignored, then profits will suffer.

One common measure of the effectiveness of inventory management is the inventory turnover ratio--it indicates how quickly inventory is sold. A high turnover compared to competitors, an industry average or past history is normally a good sign!

 

Because inventory is often overbought if its true investment characteristic is ignored, another problem comes up. One cost that is often not talked about or considered fully as a true carrying cost of inventory is labor. The more inventory you have, the more time is spent dusting, feeding, moving, and/or inspecting it.

In a liquor store, the labor carrying cost might be dusting bottles, moving boxes, or tidying up shelves. In a department store, the labor carrying cost could include putting away all those clothes that are tried on but aren't purchased. In a new or used car lot, the labor can entail parking cars, moving cars to different areas of the lot, gassing up cars after test drives, brooming snow off cars, or inspecting them. It is a very real cost! You might have to hire another person, have them around more hours or require high-cost staff to do low-value work.

 

So the point is, carrying costs are often not accurately measured, perhaps because they may not be as "loud" as ordering or stock out costs. But they should be, through analysis and study. They have a very real impact on your "bottom line." O'Hara Business Strategies can help you analyze your inventory to maximize your investment in it!