So You Had a Bad Day

I am back-dating this post to explain my Tuesday. If it sounds like I am being intentionally ambiguous, it's because I am.

My Tuesday started with some real concerns about where things in my life were headed. By the end of work, I had at least sorted out some of the reasons for fearing the worst, thankfully. Still, any time something comes along with enough inertia to knock me off course or at least give me pause like that, I tend to stop and reflect. Questions like "Am I doing the right thing?", "Is this what I am meant to be doing?" or "Where do I go from here?" pop into my mind. I think it is healthy to have a little self-reflection now and then, and it doesn't always have to be positive. I spent a lot of time reflecting Monday and Tuesday night. There are still no clear answers. Is that a good thing? Time will tell. For now, I know I have some things to consider, and I still have a bit of a waiting game to play with regard to my business. We still have to wait a week and a half for the results of our bid from last month. Fingers are crossed, prayers uttered, and shooting stars have been wished on... and time goes on.

My apologies if this post makes no sense to anyone but me. I just had to write my thoughts down somewhere, and what better place than for all the world to see?

-- Robert

P.S. I have often enjoyed playing the song "So You Had a Bad Day" when bad things happen, thus the title.

Microcredit

No, this idea is not how much of the world owes money to Microsoft. It's not how small the fine print on your credit card agreements is written, either. Microcredit is the extension of very small loans (microloans) to the unemployed, to poor entrepreneurs and to others living in poverty who are not considered bankable (ordinary lending institutions would not extend them credit). 1 The principle behind microcredit, which have been shown to work in third world countries before, show that even small loans can allow new businesses to form and increase an economy. Most applications have worked to create cash-based economies where none existed before, such as in African villages. The profits from the businesses created are used to repay the original loans with interest.

The reason I am writing about this idea, though, is not to discuss third-world applications. This week, Todd and I were discussing how the principles of microcredit could work in the United States. When he proposed it, my mind immediately started reeling with possibilities. The first suggestion he had was to implement microloans in my industry, trucking. By giving small loans to individual drivers, more owner-operators (drivers who own their own trucks) would enter the market which has shown a shortage for several years. I have been told by drivers over the years that the federal government helps foreign drivers buy their equipment (I have never researched the truth of their claims), but I see no reason such loans could not be extended to citizens. My business helps small trucking companies and individual drivers manage short-term cash flow crunches by paying them quickly, and we help them find more work to keep them busy. The existence of more such small trucking businesses helps my company be more profitable. More people have jobs, the economy grows, and so on down the line. The main point of microcredit is to eradicate poverty in the world, but there is no reason it could not work here in the U.S. While I love the financial opportunity available to creditors willing to take the risk of becoming involved in microcredit, I would love to see instead what might be achieved of welfare was used in a similar fashion. Welfare recipients could receive training in a field of interest, and upon leaving their training, they could have the opportunity to receive a microloan to start a business with their new training. I certainly hope to further explore these ideas in the future.

In researching the idea, I found several links that offer the opportunity to loan money or receive loans, which I am listing here. I would love to see more links related to U.S. loans.

http://www.mcenterprises.org/
http://www.kiva.org/
http://www.microcreditnh.org/ - help with getting loans for business owners in New Hampshire


1. Quoted from Wikipedia

-- Robert

Note: this post was not as well researched as I'd hoped. We're finally starting to get better around here, but it's been a long week.

A Whole New World, Update

This post is an update to this one from last week about the new realm my business may be entering.

After a week of analyzing information seemingly non-stop during long hours, we suddenly seemed to hit a point where we all felt like we might have bid on enough volume and enough lanes to just scale back from what we had. Then we had a wonderful conversation with a woman we had met at the conference who, despite being a competing bidder, had a great willingness to help us understand the process. I realize there is risk in trusting someone who is competing with me, but I think she realizes she has no hope of getting it all but would prefer to be competing against people who know what they're doing (which in her mind seems to be people who underbid drastically on price out of their ignorance).

That conversation left us very encouraged that we did not need to scale back at all. We also learned a great deal about the process of how awards would be made, and then how those awards would actually be given to us over time - something we were completely in the dark about. Instead of the award becoming a great source of concern (if we got too much, would we be in a lot of trouble), it became even more of a hope for the potential this new line of business would mean for our company. The process of awarding and actually placing business sounds like a wonderful new door for us to be opening because we have never had such a direct line to our customers, something that lets us know several days in advance what to expect from them. We are much more used to what they call the "spot market" where loads are covered the day we become aware of them. Having something to look ahead makes the job of our sales group - called brokers or dispatchers - much simpler because they know what they need to get covered for our customer and just need to find a truck to do it. Once that truck is under a given load, then the dispatcher can work on loading that truck when it arrives at the eventual destination, which is still an easier place to start from than we are in most cases right now. I really felt encouraged when we learned that even if we get awarded a small number, we might actually be given more than our award because it was easier to give out more loads than to go back and renegotiate with everyone if their volume increased. I would love to be someone they give extra business to after the fact. All in all, this new business could increase our efficiency and volume, and thereby our bottom line. We are very excited to see where it leads us.

This week we have spent most of our time reviewing what we've bid, reviewing contracts, and basically making sure we are confident that we are bidding proper amounts at good prices. We got a little bit of a scare yesterday when I happened to read a seemingly innocuous statement that meant my pricing calculation was off by an aver of $75 a load. I'm glad I found it now instead of later, though. Today we'll be deciding if we should change our prices to make up that money or leave them alone. The bid process finalizes a week from Monday (they added a week as of yesterday), and then we get to wait. A month later, the awards will come out and we will decide to accept or reject what we're offered. As we often say in this business, it's "Hurry Up and Wait" time.

-- Robert

But I Have More Money in the Bank Than Ever!

So often, small business owners get fooled into following their bank balance. They think, "Well, I know at the end of last month I had less than I do right now, so of course I'm making money."

Cash is not a measure of profitability. I know accounting to most people is Greek for math voodoo, but without understanding some basic principles of how to account for transactions, many a business owner is lost in the sea of numbers. The fact is, cash rarely has any correlation to profit. For instance, what happens when a company dramatically increases sales suddenly? They're hoepfully increasing their profit at the same time. But what about cash? If they sell on credit, then their cash may actually decrease. They may have to purchase more inventory, pay salespeople their commission, or otherwise use cash while they wait to get paid. In my business, I pay a driver the day he gives me his paperwork for a load, but I wait thirty days (in most cases) to get paid. During our heaviest billing periods, we have to borrow on a line of credit to keep up with our volume of sales. If we only watched our bank balance, we might do something silly like reduce sales to avoid losing money. The other danger of not understanding this inverse relationship that some companies face is selling themselves out of business. One competitor of ours hired someone they knew would bring in a lot of new freight, hoping his increase in sales would save them since they were running out of cash. Instead, his increase in sales destroyed their business as they were forced to change payment policies and drivers lost all trust in them. Not long after, they closed their doors.

Cash is definitely important to monitor. Cash is definitely nice to have, too. Understanding how little it has to do with profit, though, is paramount to grasping what a business really does day to day, and whether that business is profitable or not.

-- Robert