I learned early in consulting that when owners self-diagnose, often true issues are hidden. In fact, one of the criticisms leveled at consultants is their solutions are so simple that “anyone could have said that.” Sure, solutions are simple. Where a good consultant earns their money is asking good questions so that real problems can be defined; not in just providing solutions. My last post was a great example of this phenomenon when my printer-friend asked, “What percentage of sales should rent be?”

I thought, “Why do you suppose the owner asked that?” So, after I responded (5% to 6.5% with a typical of 6%, which is up from 4.5% over the past five years), I asked the obvious: “Why do you ask?”

And now we get to the rest of the story.

The owner wrote back, “Thanks so much for the information. I was looking back over previous years P & L’s (pre-2007) and saw that rent was running around 7% of sales. Since 2009 my rent has been at 10% of sales. This can be attributed to lower sales volume and rents increasing due to the terms of the three year contract I signed when I purchased the company.”

“My reason for trying to get a percentage of sales number was due to my need to renegotiate the terms. My landlord came back with a proposal that would reduce my rent to around 8.5% of current sales. I agree with your statement that I may have more square feet than I need given my current volume. My problem is that the new terms require I sign for three years with an escalation in rents clause over those three years.”

“In this economy and given the outlook, who knows where we will be in three years? I may want to move to a smaller space or sell/merge with another printer into their larger facility and then I will be stuck in a binding contract. The obvious answer is to go get more sales, easier said than done … Again, thanks for your help. I hope to one day get my volumes and cash flows back up to acceptable levels so I can join your group. For now however, I feel like the “Dead Printer Working” that you so often describe.

So what’s the real problem? The printer’s question was about a benchmark in helping to renegotiate his lease with the landlord. That’s valid but why was he having a time renegotiating his lease? Well, as he later told me, his sales had decreased by half in the last five years. That meant his rent doubled as a percentage of sales and I’m sure everything else was squeezed cash-wise as well.

Now what’s the printer’s reaction to it? In this case he’s putting the squeeze on the landlord to reduce the rent because the print shop’s sales are down. How come the sales are down? Well, I don’t specifically know for sure but can give a fair guess: sales are down because he’s not doing a lot about it.

Oh, yes, we hope and wish for better sales, but unless we actually do something about it; unless we specifically spend our time on selling activities, we’re not doing anything about it.

Well, and again I’m guessing here, but he can’t spend more time on selling activities because he’s got too many other important things to do. Like what? Well, get jobs out, pick up paper, deliver jobs (no, that doesn’t count as a sales call), answer the telephone and more.

In short, he doesn’t have time to sell.

And that’s for two reasons.

1. He doesn’t make time to do anything, rather reacts to whatever happens. This is most typical of small business owners regardless of their type of business. We don’t accomplish important projects (in this case selling activities) because we can’t dedicate “heads down” time to any specific project. And the reasons for that are many.

They can range from workers not being trained to do specific tasks (can’t set up the folder or can’t price jobs or whatever) to the owner self-inflicting their own wounds (owner has to price all jobs because no one else has the touch which, in turn, really means the owner hires people to stand around and watch them work).

Answer I often use here is to work with owners in establishing a weekly time planner. Yup. You can actually plan your day within reason. Specifically you plan for interruption time as well as heads down time. And then you work to eliminate the reasons why you can’t stick with it.

There’s too much to this to go into it in depth here, but if anyone’s interested, let me know and I’ll write more about it later.

2. He or she doesn’t want to sell because he or she doesn’t want to do it. Why? Not trained in “how” is the most common reason but it’s not the only one. In straightforward cases, most implement a plan once they are trained and know what to do and why.

Notice I said “most” though. Occasionally, you will find owners who have a deeper reluctance or a reluctance based on other reasons. Good news here is that there are tests for true reluctance as well as proven remedies and training for the various strains of reluctance. Yes, I will write more on this soon as well.

Let’s go back to our friend, though.

His real problem is that his sales have dropped by half and he didn’t really do a lot about it. What he was doing was focusing on the symptoms (lease was up and landlord wanted more rent).

Even worse, that’s about to lead him into a really bad decision. Again, he wrote, “I may want to move to a smaller space or sell/merge with another printer into their larger facility.”

Moving to a smaller space is logical given the right conditions (not impacting sales that much and an immediate bounce back in sales isn’t imminent).

Getting married to another printer, however, can cause many more problems than high rent. The merger of two weak companies does not make a strong one. Additionally, figure at least $1 million in sales per prime family living out of the business to prevent cannibalism. There’s more but that will do for now.

And a final word; he mentioned, “I hope to one day get my volumes and cash flows back up to acceptable levels so I can join your group. For now however, I feel like the “Dead Printer Working” that you so often describe.”

Well, lots of folks feel this way. In fact, some of my best clients felt the same way before they sought help, but really what they found was that you can’t wait until your volume and cash flow improve to seek help to get your volume and cash flow up. That makes as much sense as waiting for your cancer to subside so you will have strength enough to drive down to the hospital.

The purpose of our programs is to help owners with cash and time issues. If you want information on the particulars in your case, send me an email to tom@crouser.com.

Okay, I made some recommendations to our friend which did include getting some professional assistance. What’s important for the rest of us is the point that when we treat the symptoms, we often miss the problem. In this case the printer was dealing with a symptom (rent was getting too high as percentage of sales) instead of the real problem (significant drop in sales and not doing anything about it).

This blog originally appeared on www.tomcrouser.com.

Hi, Tom

I have been tracking my current ratio according to your formula for years and years. Now I am selling my business. We have 13 employees, a four-color shop, $2 million in sales, and very good cash flow.

The potential buyer is calculating that he is going to need $220,000 in working capital. He calculates this from the fact that my accounts receivable is about $220,000. I am taking the accounts receivable, so he will have zero A/R the first day (bulk or asset sale).

But he is asking the bank for an additional loan for $220,000 to cover his working capital. I am telling him that is too much because some of our customers pay cash or within 30 days, so he will have cash coming in to make payroll and he can work with the suppliers to get 60- to 90-day terms for the first six months or so. Also, 15-20% of his A/R will be profit.

I am telling him he should get a line of credit for $100,000 from his bank and that will be sufficient to cover his working capital until the late paying customers start paying.

Is there a formula for calculating the amount of working capital a new owner should need?

Printer in New England

Dear New England Printer

Thanks, but I can’t take credit for the current ratio formula (current assets / current liabilities = current ratio). I think it was invented about the same time as dirt and the first balance sheet. Anyway, to your question of what current ratio your buyer should maintain, I say a 2:1, just like an older company.

Why? Well, it might seem like a lot of cash, but trust me, it will be sucked up into receivables and inventory. And, although you correctly point out that many of the customers pay their bills within the 30 days after the end of the month (next month) and, further, that you can get 60- to 90-day terms from your vendors, you are overlooking one big point: the residual effect that inventory and receivables have on cash.

When do you get your money out of inventory? No, it’s not when you collect from the customer. That’s because most all of us keep inventory on hand. So, if your inventory averages $5,000, then you will never get that $5,000 back until you shut down the business.

That’s because you are constantly buying inventory for the next job that comes in. Think of it as that last quarter tank of gas we usually carry around in the car. If we fill up every time we get down to a quarter tank, well, there’s a quarter tank of gas that will always ride around with us.

By the way, you can create extra cash by reducing the average inventory on hand, which is why the concept of “just in time” inventory became so popular with American manufacturers.

Same thing applies to accounts receivable. We start the business with no one owing us anything and then we add the first 30 days of “charge” sales to accounts receivable. Now, it’s true that we are typically paid in the second 30-day period for the amounts charged during the first 30 days, but while we are deducting the payments, we are filling up our tank again with the new charges from the second 30 days.

As a result, there is a residual in inventory and accounts receivable that you will never get out unless and until you close down the business.

Now, on the flip side, there’s a residual in accounts payable as well. That means you charge items during month one that are paid in month two, but you are also charging additional items in month two as you pay, so there’s a residual there (like borrowing money).

How much should the new buyer plan for? Well, at a minimum, I would expect two weeks of inventory on hand at any one time. And if your direct materials are 25% of sales, then you could use the following formula: Annual sales x 25% = direct materials for year / 52 weeks = weekly usage of direct materials x 2 = estimated inventory on hand at any one time

Now different businesses have different direct material percentages of sales. An auto parts store would have a much higher one than a print shop, for instance—probably 50% or more, compared to the print shop’s 25%. Nonetheless, the calculation is the same. Additionally, one has to consider how long it takes to obtain the inventory. Two weeks is common inventory for items that are readily available, but in some cases it takes months to receive. In those cases, the amount of inventory may be greater.

In the case of accounts receivable, if the terms are net 30, then you can expect something like 35 to 45 days of charge sales in receivables and the residual effect is the same.

So the calculation there is easy as well: Year’s sales / 12 = 360 = days’ sales x 35-45 (choose your number of days) = total AR

Note that I divided by 360 instead of 365 days, which is an accounting convention. Also I know that most folks aren’t open 360 days a year, but calendar days are typically used.

OK, now your buyer can estimate his beginning balance sheet (pro forma) and then work backwards to see what he needs in absolute dollars

As a final note, realize that most businesses do not have a good 2:1 current ratio to start, and often end up thinking they’re always supposed to be without cash, get accustomed to it, and always live that way.

Finally, note that most banks will either not loan for working capital or will limit the total amount. Anyway, let me know if you need more on this. One of my favorite topics…

Tom

Hmm. Is the 1099 provision of the Health Care Act really that onerous?

I work with hundreds of small businesses in the US, mainly in the printing industry, and 99% utilize QuickBooks and/or a similar automated system. Those out there who are still on a manual system should be automated for their own best interest.

Now in QB, the ability to track purchases from a vendor is a couple clicks away, and printing out 1099s is fairly simple and quick.

The hard part would be collecting the FEIN numbers. I anticipate vendors will quickly begin providing this info on invoices should this provision stand. Why? Vendors won’t want incoming calls seeking the information any more than we small business owners would want having to track them down.

So, what is the upside? Upside is the additional revenue which could go to holding down taxes paid by business owners who fully disclose their income (which has been estimated by the Congressional Budget Office at $2 billion a year or $19.2 billion through 2020).

Yes, unbelievably, there are business owners who try to hide income and, thus, not pay their fair share of taxes, while other business owners fully disclose and pay a higher rate as a result of the scofflaws.

So it seems to me that it is in the best interest of those of us small business owners who pay our taxes openly and honestly to accept this reporting procedure in exchange for a lower tax burden. At least that’s what it seems like to me…

So what’s up with the National Federation of Independent Business? I’ve engaged in a Tweet-a-thon with them @NFIB in which I’ve tried to point out inconsistencies of a member organization soliciting other members in direct competition with many of their own members.

As a matter of disclosure, I work with hundreds of printers, copy shops as well as small businesses engaged in packing and shipping throughout the United States, many of whom are NFIB members, as is my firm. Fact is, I encourage and recommend the organization for it is an efficient voice of small business, and their basic model is great. They survey the opinions of small business owners and pass them along at the highest level in Washington as well as most state capitols. That’s a great service for all of us.

What got me riled was the NFIB promotion of FedEx Office.

Note I didn’t say FedEx Shipping, I just object to their branch formerly known as Kinko’s being promoted to fellow members. FedEx Office has shops throughout the US (and abroad) that copy, pack, offer computer services and other services just as many of the readers of Quick Printing magazine and NFIB members themselves do. Oh yes, in addition, they are a drop off point for FedEx—again, just like many of us (NFIB members) are.

More disclosure: I have written for QP magazine for 25 years or so and remember Paul Orfalea (founder of Kinko’s) at NAQP (National Association of Quick Printers) meetings back in the 1970s. We all did and do much of the same stuff, and Kinko’s was a good competitor over the years. No harm or foul in that.

In a previous distant life, I was an executive with a local Chamber of Commerce. In a chamber, just like at NFIB, we had a bunch of local business owners. One thing we didn’t do was to give one member preferential treatment over others. Imagine a local chamber promoting one restaurant over their other restaurant members. A self inflicted wound is how my boss would describe it.

So, imagine my surprise when @NFIB began tweeting things like: “@NFIB NEW Member Benefit: Save up to 20% on FedEx Office Enroll Now: http://bit.ly/hC9vq4 #NFIBbenefits”

Well my tweets received the following response from NFIB -> NFIB @TomCrouser: Our free webinars help members with small biz needs. Guest speakers come from all industries & companies, so overlap occurs.

I say they missed the point.

What other benefits does NFIB offer that directly competes with their membership base? FedEx shipping? No. We small businesses don’t have anyone who has an international network like FedEx or UPS.

I looked around the NFIB site for a similar conflict as was intimated by their tweet. Small business health plans? Don’t think so, as most of us aren’t insurance companies. Sure, we have some agents and representatives but we aren’t large insurance companies so brokering a deal with them seems reasonable.

What about offering credit cards or credit card processing? That seems reasonable as well, as that’s not what we members offer either. In many states, NFIB has group rates, discounts, and/or potential dividends on workers compensation coverage. Hey, I’m all for it.

It just seems to me, and I admit I have a simple mind, that NFIB is not doing itself a service by encouraging other NFIB members who aren’t in the copy, printing, packing, or shipping business to select FedEx Office over their other hundreds of members who provide the same service.

I have no way of knowing, of course, how many of the twenty-some thousand printing companies out there which compete with FedEx Office actually are members of NFIB, but I suspect a substantial number are.

So, as Frank Sohn use to say, it’s a self-inflicted wound that they are promoting. They don’t need it and many of us don’t appreciate it.

I thought it appropriate to ask if you regularly take a vacation. Why? Well, many business owners are more martyrs than managers and confuse service with servitude. If you feel some of this applies to you and would like a solution, then read on.

Va•ca•tion: (1) a period of time devoted to rest, travel or recreation (2) a scheduled period during which the activities of courts, schools or other regular businesses are suspended.

Hmm… There are reasons a business owner cannot take a vacation, at least a vacation according to the classic definition. We can travel but it’s impossible to rest when we have to direct the work of others who are still at the shop. So, we can travel but not to areas where there is no cell phone coverage.

Even at that, our travel time is restricted to long weekends or a trip to the trade show. That’s because we can’t travel when the shop is busy because there’s too much to do. Then we can’t travel when the shop is slow because someone has to make sure that people are busy.

Okay, I’m teasing. If you’d really like to change the poor me, the martyr complex, then there are two things you can do.

1) Organize around functions, not people. This means you have to select, install and train others to make decisions without you. While it can be done (we’ll go into it more in future editions), there’s an easier way for most of us up to about 15 employees.

2) Close. That’s right, close. Pick time when you are slow and shut the shop and have everyone go on vacation. That way you can actually rest because there won’t be anyone back at the shop whose work you have to direct.

Most won’t consider it because the perception is that it has such an adverse impact on customers. However, not closing means a typical shop of six people works shorthanded 27% of the year.

Do the math: 6 people x 2 weeks’ vacation each = 12 weeks, as only one can go at a time, plus a couple of sick or personal days each, and you have about 14 weeks of short handedness, or 27% of the time. The closing alternative, using the same math, is 11% of the year (2 weeks vacation + 2 weeks other). No wonder you feel put upon when someone wants to take off for their vacation. You are tired of being short handed.

When? Unless your shop is unusual, close a week the first of July (Independence Day in US and Canada Day in Canada) and one between Christmas and New Year’s Day. That’s when business is s-l-o-o-o-w. Close.

Yea, but …. yes, we’ve heard why it won’t work before. Here are our answers to your anticipated questions:

No, customers won’t desert you. Take the opportunity to make a real sales call and prepare your customers for the vacation period. No, just don’t send them a notice, actually talk to them. What do they need printed so they won’t run out? In shops where this has been done, we have measured the two month period (prior to closing and month of closing) and find sales are the same if not more in closing years vs. non-closing ones.

There’s this customer … We know. They come in every Thursday. Alright, figure it out. With advance notice, you and the customer will be able to come up with a creative solution. Alternative is not to figure it out and be a martyr; so figure it out.

Employees won’t like it #1. Hmm… Memorize the following and repeat it to the objecting worker: We all work for the customer and need to be here when they want us here. The reason we are slow during these periods is that customers are not here, so they don’t need us here and therefore we will be closing for vacation at that time.

Employees won’t like it #2. They have already scheduled their vacation or want off at different times during the year. No problem. As long as you and the worker agree, they may take time off without pay at other times. But, no, they can not work during the vacation closing because no one else will be working then. And yes, they will receive their vacation pay only during the vacation closing period.

Law Won’t Allow It. Yes it will. There is no requirement that you grant vacation time off. So the vacation closing is treated the same as a holiday. If a person is employed during that time, they are paid. If not, they are not. Simplifies accounting for vacation pay accruals as well.

Bottom line here is you can take time off for vacation rest, travel or recreation. Best way to do that for most businesses is to suspend activities. So be smarter than a martyr. Figure it out and just do it.

What coach would plan to lose half their games before the season starts? None that I know. Yet don’t we do the same thing when we create a monthly budget on our average month’s sales? After all, an average is in the middle, with half more and half less. Here is one way to estimate a realistic and sustainable sales level so you can create a realistic and sustainable budget.

1. Start where you are. If you sold $1.2 million last year, there is no negative sales trend, and you know of no reason you should reduce your monthly sales estimate, then list the monthly sales from highest to lowest (most easily done in a spreadsheet: Excel Users: Data -> Sort -> select your monthly sales total cells).

2. Reduce sales if there is a significant downward trend or you have any other reason to decrease the monthly totals. Either deduct an overall percentage or do it month by month. Either way, reduce them and then list the monthly sales from highest to lowest.

3. Don’t assume there will be a sales increase (not much of an issue these days). Wait until you actually increase sales and they show up in your 12 month actual numbers. That way you won’t be spending money before you actually get it.

4. Eliminate the three highest sales months. We lose money faster in months when sales are down than we earn when sales are up the same amount. So, our higher sales months subsidize our lower ones.

5. Average the nine lowest sales months and use that average for your monthly financial budget. What will that do? It forces you to create a sustainable financial budget that you should hit 9 out of 12 months and be within striking distance the other 3 months.

6. Create a financial budget using this sustainable number. You now know how much is coming in, so now plan for what you are going to spend. And continue to plan until you’re spending less than what you take in.

7. Now, set a Sales Goal that is 20% higher than this sustainable financial budget. If your financial budget is $100k per month, your sales goal should be $120k. A good job is hitting your financial budget and that means you get to keep your job for another month. Don’t get ecstatic. A great job is hitting your Sales Goal. Hit that and you can go party.

If you think the end of the tax year is the time to buy equipment to save money; well, it’s time to think again. Why? Section 179 Accelerated Depreciation saves no money and it can hurt your cash flow. Here’s how.

Section 179 Accelerated Depreciation in the U.S. does just that. It does allow you to accelerate or move your depreciation deductions you would take during out years to this year, but it provides NO additional deduction. Over time, you have exactly the same tax effect.

Okay, you might be thinking, “What is wrong with taking the depreciation this year instead of waiting?” Follow the cash to find out.

If you pay little or no money down to purchase $50k of equipment this year, you probably can deduct the amount as an expense and reduce the amount of income tax paid this year. “Well, isn’t that saving money? No, because there’s always next year.

Next year you still have to repay the loan (cash out) but you have NO offsetting expense deduction (depreciation). So, we get upside down in our car payment, so to speak. We pay out $12,500 of cash to repay the loan in out years and have $0 of expense deductions, which means we are paying MORE taxes in out years, precisely when we have less cash (because of the payments). Had we delayed the deduction, our depreciation expense deduction would roughly offset the cash out.

What should we do? Again, follow the money. If you pay cash for equipment, then take the Section 179 deduction. If you finance, however, you are usually better off deducting depreciation normally.

That way you will have less of those confusing moments when the accountant says you made a lot of money, yet you are wondering where in the world is the cash.

A print shop owner is learning a lot about his business the hard way now that he terminated a high priced and overly demanding prepress worker. Specifically, that means he’s doing prepress himself and seeing more cash as a result. Also there is a side benefit that everyone is more of a “team” and he has a renewed spirit and vision that has been missing for years. All he has to do now is beware of the Downsizing Trap.

What’s the trap? It is playing defense to the exclusion of offense. In any game, you still have to put points on the board to win, even when you are behind.

In our friend’s case, he was the selling owner and, as with many businesses, sales were down. Then the prepress worker went too far one last time and he was “made available to the industry.” Then the owner re-engaged and learned what was needed in prepress. Jobs aren’t getting out as fast as they use to; but not as many need now get out to make the same money.

Unfortunately, many owners engage in spiritual management to the exclusion of the real issues of getting jobs out, getting jobs in, and getting paid. Worse yet, when faced with a similar downturn, many fail to re-engage and standby as their companies fail. So, this owner deserves a special commendation for, in battleground terms, a good retreat is always better than a bad stand.

Now he must understand the purpose behind a retreat. A retreat is not surrender, rather it is time to regroup and attack anew. In the print shop, the owner downsized and stepped in to fill a needed function. He found cash relief because he wasn’t paying the overpriced prima donna. So, the Downsizing Trap is that he will become comfortable and stay there.

The owner must realize that this better life lasts only a short while because he’s not on the battlefield engaging customers. Without new customers, business will erode.

The purpose of business, according to Al Ries (marketing guru and author of many marketing books) is to: attract and retain customers. And in this business, we know that our top 25 accounts provide typically 50-75% of total sales. So, when something happens to one or more of them and we are bunkered down in prepress we lose the capacity to replace them. So we rely on what worked in the past: we downsize again and take on more work ourselves.

In short, we downsize ourselves to death. We have seen it time and time again. We talk to a company doing $1.8 million with 22 people, but they’re not making money. A year later we talk to them again and they are producing $1.3 million with 16 people. Then they’re at $850,000 with 10, and so on until they die.

Our owner needs to work himself back up the ladder by working his way into his next job until he’s able to reengage selling efforts at least part time. Specifically, he either cross-trains someone who can learn what he has learned or bring someone in from the outside so he may again step up to the responsibility of engaging customers.

Point: You downsize to regroup and attack, not to hide and hibernate. Too much hibernation and you die.

I’m tired of reading material written by folks who don’t understand us. I think Forbes is one of the biggest offenders. AOL put Richard Branson, founder of Virgin Airlines, as chairman of their Small Business Board of Directors. Then there’s the likes of Inc. and Entrepreneur that assume all of us want to float an IPO (initial public offering) and get rich. And then there’s the flip side: those who treat us as self-employed and give us stories about five helpful iPhone Apps and the like. Okay, here’s the real scoop.

An entrepreneur is one who brings together the forces of land, labor, and capital and makes a profit. Lesson one is that a self-employed person is not an entrepreneur; rather they are self-employed because they employ themselves only. Nothing wrong with that audience, but that audience isn’t us.

We employ others and, as such, can take a paid vacation, for the business goes on making us money when we aren’t there. At least, it is supposed to do so. Those who are working exclusively for themselves, whether doing accounting, lawyering, or cutting grass can’t do that because if they don’t work, they don’t earn. Therefore, we real entrepreneurs have employees and real people headaches. That’s one.

Two is that we are not ever going to take our business public through an IPO. Some of us may dream of that and a few may even do it, but the vast majority of us will not. So we don’t need to know about VCs (venture capitalists). The funds for our business come from our retirement account, savings, credit cards and/or any other way we can scrounge around for a few bucks to get started. And since either the cash or the credit belongs to the family, that’s why I say we are family-based rather than market-based (as in selling stock on a broad scale). And, by the way, there are about 20,000 public companies in the U.S. and about 12-15 million of ones like us.

Three is that we are geographically oriented. We didn’t get here by figuring out the best gizmo and then moving to where gizmos were needed. No, we are where we are usually because of our family or happenstance. We look around and think, “Gee, wonder what I can do here to make a living.” And then we open that kind of a business.

Four is that we are a lifestyle business. The reason I say that is if we were all about profit we’d all be junk dealers or auctioneers because they usually have the most cash in the neighborhood. No, we’re about a lifestyle: something that has hours that agree with us, something that doesn’t require us to travel all of the time, something that allows us to hold our head high at the Rotary meeting, and something that, preferably, we have an interest in.

There’s more, but I’ve got better things to do than give lectures to the big magazines about doing some market research on us before filling our in-box with stuff that is too farfetched (IPOs) or too trivial (social media will save your business).

Why does it take us so long to train someone?

I think I found the answer. Visited a print shop last week where workers weren’t trained. In talking with the owner about how to get them trained, I think I stumbled onto something profound. The reason it takes us so long to train is we don’t train; we wait for enough different jobs to come through so we can show them how to handle each one. In short, that’s not training; that’s waiting for them to gain experience.

What’s the difference? Training is teaching vocational or practical skills so the trainee gains the knowledge, skill, and competence to perform. Experience is figuring stuff out in the heat of battle. Which is better? Both are necessary, but we typically don’t do both, rather we rely on the Osmosis Method of Training. You know, you stand there and watch me do this and pretty soon you will know how to do this too. Some say that experience is the best teacher, but the problem is you have to die to graduate.

Okay, what if the Army trained only using experience? Here’s your M-16, son. The bad guys are coming over the hill, so I’m gonna be busy, but you be sure to ask me if you run into anything you don’t know. Hmm.

How do you do it? Set aside time to train. It can be before you open in the morning or anytime you can carve out specific heads down time. Do not train during the heat of battle. Now, here are the four basic steps in On the Job Training :

1) Put the worker at ease and find out what they know. Who knows? They may know more about it than you think and you can tailor your approach to their level instead of being too basic or too advanced.

2) Show them what you are doing while you tell them what you are doing.

3) Have them show and tell you while they do it.

4) Test them by using another person, and have them signed off on the task.

The most important step is the last one—testing. The other person commonly is the trainer’s boss, but since you’re the boss and the one usually doing the training, you need someone else. It can be anyone, but you’re better off with someone credible like your paper salesman. Okay, I used a paper salesman once and he did alright.

Anyway, you also need a task listing. Go to your computer, open up a Word.doc or whatever and begin making a list of tasks that a person has to master to do whatever. Also assign a time to each of the tasks.

Assume you wanted to teach someone the care and feeding of a desktop printing calculator—assuming there’s still one around. What do they have to know? Break the job down into individual tasks and assign a time standard to each step. Don’t worry about if you are wrong on the time or even if you leave out a step. You’re the boss. When you get into the training if you think you should change something, then do it. In my example, a trainee has to:

1) Change paper rolls, 2 minutes

2) Change ribbons, 2 minutes

3) Clean the print head, 1 minute

4) Know how to add, subtract, multiply, and divide. We don’t do square roots or differential equations in this business, so those four are the basics they need.

But wait, have you ever shown someone how to do something and then they don’t remember the next day? That’s why you use the four step process.

1) Ask them what they know about changing paper in the calculator.

2) Show them how to do it while you change the roll.

3) Have them do it while they show you.

4) Then test them by having them show and tell your mysterious other person within the assigned time. Remember the task listing you prepared? Print one out. For each of the tasks, have the trainee as well as the rater (mysterious other person) initial and date each step. Now put the training record in their personnel file. (Okay, scan it to a PDF and file it appropriately on the hard drive if you want).

Now, if and when the person is unable to accomplish the task they have been trained to do, you can go back to the training record and discuss why they can’t do what they knew and demonstrated on such and such a date.

Rarely is that an issue. Most common is when you have to train someone else to do the same thing when the first guy quits, you have a task listing to go back to and jump right in. You don’t have to create a lesson plan every time you have a newbie.

While my example is a little bit on the simple side, you can train a person to run a nuclear reactor in much the same way. And now you don’t have to wait a year or more for enough jobs to come in. You can just train them and get on with life.

Now my printer-friend has a plan. If he uses it, he will begin digging out of his time management quagmire.