The Goal Movie DVD by Eliyahu M Goldratt is ON SALE

Through the month of December 2010 get The Goal movie based on The Goal book by Eliyahu M Goldratt for $645.  It's regularly $895 and not often on sale.

Available in English, Spanish, Chinese and Hindi. Order Here

Theory of Constraints POOGI Part 62 Exit Planning Questions

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Brad: Next, we have a choice. Most business owners have a desire to transfer the business to one or more "insiders", but the business may be worth more and the business owner would make more money sooner if the business was sold to a third party. So, it's helpful to choose one or the other for exit planning. Choosing one initially doesn't mean that you can't change your mind later:

4. Do you know how to sell your business to a third party and potentially pay the least possible taxes?

5. Do you have any plans on how you will transfer your business to family members, co-owners or employees while paying the least possible taxes and enjoying maximum financial security?

Dr. Lisa: And why do you say that transferring to insiders yields less money or takes longer for the business owner when compared to a third party sale?

Brad: Most businesses are not saleable. They are too small, not profitable enough, or have some other issue(s). No business broker or investment banker will waste their time representing a business that buyers won't buy. If a business is valuable enough to be sold to a third party, the process takes time to execute and there are plenty of pitfalls, but business owners that can sell to a third parties usually do. The threshold is somewhere between $5 and $10 million in business value, depending on market conditions and the quality of the company. These business owners cash out, and with proper planning, can still take care of the insiders they want to.

But it is valid to transfer to insiders. The problem is that most family members, co-owners, and employees don't have any money! What is required in this case is an elegant exit plan, because it will be the current and future cash flow of the business that is needed to fund the business owner's exit from the business, in conjunction with the ownership transfer. I find it interesting that rather that selling for maximum value as in a third party sale, transferring for the lowest defensible value is the best way for the business owner to maximize after-tax cash in a transferring to insiders.

Dr. Lisa: Transferring to insiders sounds complicated.

Brad: It doesn't need to be. In either case, a sale to a third party or a transfer to insiders, the business owner needs professional help. But we aren't done with the questions that need answering. The next two are related:
6. Do you have a continuity plan for you business if the unexpected happens to you?

7. Does your family have financial contingency plans if the unexpected happens to you?

Dr. Lisa: In TOC, we say the first rule of management is to "be paranoid". So this has to do with business continuity and personal wealth and estate planning. Are most business owners prepared?

Brad: Some are but most aren't. And even if a business owner did a buy-sell agreement, or estate planning, chances are that was years ago and the documents are out-of-date. Exit Planning requires a team of advisors, coordinated by an exit planning professional. Creating an exit planning roadmap, implementing it over time, and keeping it up-to-date is crucial for the business owner that wants to meet his or her retirement objectives.
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Want to have an Exit Plan? Go to http://www.scienceofbusiness.com/exitplan.aspx and take the first step.
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Here's to maximizing YOUR profits (and selling price of YOUR business)!

Dr Lisa
(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

Theory of Constraints POOGI Part 60: Exit Planning cont.

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Dr. Lisa: What’s the impact of the economy on exit planning?


Brad: Unless the business managed to maintain its sales and profit levels and growth rates, the business is probably less valuable. So, even business owners with exit plans have probably extended the date of their exit and/or reduced the amount they are willing to accept for the business.

Dr. Lisa: How about demographics of business owners?

Brad: With so many businesses owned by baby boomers, there are a lot of business owners our there that would like to exit in the next few years. I heard a statistic the other day that half of all business owners are emotionally—not financially—ready to sell, but are waiting for a white knight to appear, meaning they aren’t doing anything to properly prepare the business for sale.

Dr. Lisa: What are the choices a business owner has for selling or transferring his business?

Brad: The business owner would usually make the most money by selling to a third party. But many business owners have different objectives, and would prefer to transfer the business to a family member(s), or another owner(s), or to an employee(s). Exit planning helps in both cases.

In a sale to a third party, exit planning can minimize taxes and yield the greatest amount of after-tax proceeds from the sale. In a transfer, exit planning can help the owner keep control as long as necessary, minimize risk, and maximize the amount of after-tax money received.

Dr. Lisa: We work with owners of small businesses all the time. I see how exit planning fits. Business owners need to put in place robust processes—using TOC, Lean, and Six Sigma—that help their company grow and become more and more profitable. And they need to put in place a management team to run the business without being dependent on the owner. Both make the business more valuable.
Brad: Correct. Without an exit plan, a business owner does not have an end in mind. However, even with an exit plan, growing more and more sales and profits is not a given. The TOC approach to marketing and sales fits perfectly. Most of these business owners do not now have an offer that is “unrefusable” to their customers and prospects (a “Mafia Offer”) and a robust sales process to deliver it. Improved marketing and sales is a requirement for every company, with or without an exit plan. But coupled with an exit plan, the business owner is more likely to meet his exit planning objectives.
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Want to have an Exit Plan? Go to http://www.scienceofbusiness.com/exitplan.aspx and take the first step.
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Here's to maximizing YOUR profits (and selling price of YOUR business)!

Dr Lisa Lang
(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.

Theory of Constraints POOGI - Part 53: Yes, but… The Value of Concerns and Objections

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Brad: Both as a business owner, and back when I worked for large companies, I have found a lot of negative people. Someone has a good idea, and then it seems like everyone has a “yes, but…” It’s irritating.

Dr. Lisa: Particularly if it’s YOUR idea. In Theory of Constraints, we call that a “yes, BUT”; Small yes and a big BUT.

Brad: Why can’t people be more positive and optimistic? It seems like such negativity blocks progress. Perhaps such people are the problem.

Dr. Lisa: Hold on. To voice concerns is part of human nature. When we hear an idea or solution presented, it is natural to think of what negatives might come from it. The presenter is normally very proud of his or her suggestion, and just as often is not fully aware of what negatives might result from implementing it.

Brad: So he or she is expecting praise and to get credit for the idea?

Dr. Lisa: Exactly. Now, depending upon the trust level and power relationships within the group, and whether there have been previous bad experiences from raising concerns, the concern might not be expressed. Instead, you might hear “let me think about it”. However, we don’t think about it. What we think about is our “BUT”, and hope the idea just goes away. So, we don’t benefit from the idea, and we miss the opportunity to improve it by voicing the concern.

... to be continued in Part 54.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.

The Goal Movie by Eliyahu Goldratt on DVD on SALE

The Goal DVD normally sells for $895 but is on sale until December 31, 2009 at midnight ET. From now until then you can get $250 off. So The Goal DVD is yours for only $645. The Goal movie is ON SALE!!!!Yes, the best selling book, The Goal by Dr Eliyahu Goldratt was made into a 45 minute movie.

To take advantage of this great offer, check on any of the hyperlinks in this post.If you miss this opportunity, just send me an email and let me know that you want to be notified the next time there is a sale.

This video takes The Goal book and shows you how to put the theories to work in your company.

Based on the best-selling book by Eli Goldratt, The Goal tells the story of Alex Rogo, a plant manager facing the threat of his plant's closure. The video follows Alex and his team as they use the Theory of Constraints to transform their mediocre division.

The first obstacle standing in the way of implementing a major change is reaching a wall-to-wall agreement on the direction of change. A powerful tool that can be used to create such agreement is The Goal: The How-To Version” video. The use of this video is not limited just to the beginning of the implementation process. Reaching agreement on the change in direction is not a one-time effort. As the company moves in a new direction there will be some unavoidable diffusion. To prevent too much diffusion there is the need to repeatedly realign interpretations and periodically use the movie.

The Goal Movie DVD by Eliyahu M Goldratt

The Goal DVD normally sells for $895 but is on sale until September 29th, 2009 at 8 pm EDT. From now until then you can get $250 off.

So The Goal DVD is yours for only $645. The Goal movie is ON SALE!!!!

Yes, the best selling book, The Goal by Dr Eliyahu Goldratt was made into a 45 minute movie. And until September 29th 2009 you can get it at a discount.

To take advantage of this great offer, check on any of the hyperlinks in this post.

If you miss this opportunity, just send me an email and let me know that you want to be notified the next time there is a sale.

A Process Of On-Going Improvement (POOGI) - Part 39

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Are you externally constrained? Yes or no?

Your company is externally constrained if your company (usually) has the capacity to sell more than it does.

We call it externally constrained instead of market constrained because there a many other factors external to the company which may constrain its ability to sell. For example, government regulation is often an external constraint. Credit availability would also be an example of an external constraint.

Being externally constrained is not inherently bad. In fact, an amount of “protective capacity” is necessary to be responsive to the market, have competitive lead times, and meet due date commitments.

Conventionally, a company responds to being externally constrained by cutting costs, especially people costs by layoffs. In some instances, especially when the company is short of cash, this may be necessary. However, contrary to popular opinion and practice, such attempts to “balance” capacity to sales demand is not good management because it directly causes a chaotic work environment, leading to long lead times and poor due date performance.

Are you cash constrained? Yes or no?

Your company has a cash constraint if and only if you have enough customer orders but your suppliers will not supply you their products and services unless you pay with cash upfront.

Approached conventionally, a cash-constrained company will usually go bankrupt because in the short term, the timing of the cash outflows is more than the cash inflows, and the cooperation of the suppliers and customers cannot be achieved quickly enough to prevent the company from running out of cash.

While it is rather unusual to be cash-constrained, recent economic events may result in customers unilaterally stretching out payables and/or banks restricting credit, so a cash constraint can suddenly emerge.

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang

(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.

Job Shop Scheduling and Machine Shop Scheduling

If you own or run a job shop or machine shop, check out this Special Report on the "9 Challenges to Scheduling Your Job Shop and Why Your Schedule is Dead on Arrival!"

I'm a lot like you. I read The Goal and loved it. I related to it, and thought it was common sense. It was so refreshing to read a business book like that.

I totally got the hike with the boy scouts and having Herbie lead, then off loading Herbie's backpack. The game they played with matches showed the impact of variability and why it is so hard to get things done.

All really good stuff and I read it in one sitting. I wanted the results they had in The Goal - I wanted to be 100% on-time, I wanted less chaos and less work in process, increased throughput and I wanted all this with the same or less overhead.

But then I really didn't know how to apply it to my situation. I didn't have the budget to hire a consultant to help, much less an expensive Theory of Constraints consultant.

So I did what I could, based on what I understood. I identified what I thought was our constraint, and I studied it. I determined what was keeping us from getting more through the constraint. I made a few changes.

And, we got some results. Nothing like what they had in the book mind you, but some results. But that is where I really got stuck.

I knew much more was possible, much bigger and better results. After I had read The Goal, I did some research and found some published success stories. These case studies showed that I should have achieved more.

But I rationalized -- we're different. We are in a different industry, a tougher industry. Maybe it just doesn't work in our type of business. Yeah, that's it - too bad, it just won't work for us.

Now fast forward a few years.

In the mid 90s Theory of Constraints became more available. There were annual conferences, training classes, and many more books on the subject.

I went to school on all of it.

I immersed myself in the theory. I read everything, I asked a ton of questions. And what's interesting is that I still didn't really know where to start. I still didn't know how to get beyond a few modifications around the constraint and I still didn't know how to get the kind of results I had read about.

And this was after I had been to the mountain. I had taken courses and studied at the Goldratt Averaham Institute founded by Eliyahu M Goldratt, the father of Theory of Constraints.

How can common sense be this hard?

I finally got it when I became a consultant and worked with several clients.

By the way, all my clients had read The Goal, and only achieved small results on their own or got no results because they simply did not know where to start and so had not tried.

My first client was a machine shop. And since then I've worked with a number of "metal benders" - custom machine shops making custom parts and job shops. Some of the shops I worked with had 80% of their parts/products repeat and some only had 20% repeat. But they all had terrible due date performance (on orginal dates), high work in process, and lots of chaos.

I needed to figure out how to make a difference in these highly complex environments where the constraint can move week to week depending on the mix of work that came in.

I discovered, in working with these clients, the secret -- the way to implement what we read in The Goal.

I figured out:

• the order to implement. What to do first, then second and so on.
• that the first steps we take need to provide BIG results to get the buy-in and support to continue.
• that the scheduling and priority of the shop needs to be visual.
• that the visual scheduling system facilitates eveyone's involvement and the desperately needed communication throughout the shop.
• how to create an effective scheduling system that does not require massive computing and manpower to run.
• how to accommodate a complex environment where the constraint moves frequently.
• how to implement the Theory of Constraints process of on-going improvement so that we continuously improve.
• and, how to coach managers and supervisors to get it done.

This approach lead to the big results that I had read about in the case studies and in most cases we achieved the results faster.

We also found that our visual scheduling system created faster buy-in and helped the changes to stick.

So my partner, Brad, and I sat down and documented what we did. We documented the process we used, we documented the differences between companies that can cause differences in the solution. We ended up with THE process to quickly implement what we read about in The Goal to get quick, substantial results.

So why am I telling you all this?

Well... this is something of an "open secret"... I have been working on a way for you to have the exact same system that my job shop and machine shop clients use without the burden and expense of an on-site consultant.

And we have now tested it with several clients and we have done 2 Velocity Scheduling System Coaching programs. So the program that starts on April 27th is our 3rd Velocity Scheduling System Coaching Program. We focus on job shop scheduling and machine shop scheduling.

Now is the right time for this. In fact, I would say that now is THE critical time. Implementing the system is particularly important in this economy for 2 main reasons. 1) With the system it will become clear where you can cut people and have the least effect on productivity; and 2) If you have a market constraint then it is paramount that you improve your due date performance and reduce your leadtimes so that you can capture more market share. This will be particularly effective as your competitors cut people, and get worse on due date performance and leadtimes.

This system has PROVEN to dramatically increase your due date performance, reduce your work in process and decrease your manufacturing lead-times without a consultant camped in your conference room. And of course, this will lead to improved cash flow and increase your profits!

Here's an update I got just received (April 15, 2009) from a client that participated in our VSS Coaching Program:

"Just to update you on our company status, I thought you'd be happy to know we
are still 100% on time and raking in some good profits. I've seen a higher frequency of penetration into the red zone, but no late jobs. We just shipped the mother of all jobs today (in excess of 4000 man-hours) on time! Furthermore, the price tag was $750K, of which final throughput MINUS LABOR was nearly $390K! (Don't tell the customer that)"

That's all for now...

Wishing you success,

"Dr Lisa" Lang

P.S. To sign up go to http://www.velocityschedulingsystem.com/ The next session start
on April 27 and will be limited to 10 companies to ensure you get all the
coaching you need!

If you're interested in learning how to run your shop according to the Theory
of Constraints and Drum Buffer Rope principles discussed in The
Goal by Eliyahu M Goldratt, then sign up for our next Velocity Scheduling System
Coaching Program.

A Process Of On-Going Improvement (POOGI) - Part 35

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

“A Technology Gap”

At the recent NTMA conference, Professor Paul Zane Pilzer spoke of the importance of technology in wealth creation, and of a “Technology Gap”. Let’s review a few of his concepts, and then relate it to a process of ongoing improvement.

Here are Pilzer’s Principles of Economic Alchemy:

1. Technology is the major determinant of wealth because it determines the nature and supply of physical resources.
2. The advance of technology is determined mainly by our ability to process information.
3. The backlog of unimplemented technological advances (the “technology gap”) is the true predictor of economic growth for both the individual and society.

Pilzer described his Six Laws of Economic Alchemy:

1. By enabling us to make productive use of particular raw materials, technology determines what constitutes a physical resource.
2. Technology determines our supply of existing physical resources by determining both the efficiency with which we use resources and our ability to find, obtain, distribute, and store them.
3. The rate at which a society’s technology advances is determined by the relative level of its ability to process information.
4. By providing us with new products and processes that change the way in which we live, technology determines what constitutes a need, and hence the nature of consumer demand.
5. Technology determines the level of consumer demand by determining the price at which goods can be sold.
6. The immediate economic potential for an individual, an industry, or a society can be explained by examining the technology gap—the best practices possible with current knowledge versus the practices in actual use.

Related to #6, Pilzer defines a “Ready-to-be-Implemented Technological Advance” (R-I-T) as a fully developed better product or method that is ready to be put to use.

We normally think of technology as something physical, like a machine. But Pilzer’s view of technology is liberating. His fourth law includes “processes that change the way we live”.

There is good news and bad news.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

A Process Of On-Going Improvement (POOGI) - Part 30

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

Measurements (Not Incentives)

“Tell me how you measure me, and I will tell you how I will behave. If you measure me in an illogical way…do not complain about illogical behavior”.

This quote by Dr. Eli Goldratt, the father of the Theory of Constraints (TOC), speaks directly to the cause and effect power of measurements, and to the general misuse of measurements.

We business managers often struggle to determine what to measure and control, and how to motivate employees. Some of us measure many, many things, while others of us don’t measure much at all.

Think about these questions:
· What problems are we trying to solve by using measurements?
· What and how are we measuring now?
· What problems do we cause by the way we measure now?
· Is there a better way? That is, what should we be measuring and how?

First, let’s set a context for our discussion of measurements by agreeing on the overall objectives of our organization:

1. Make more money now as well as in the future,
2. Provide a secure and satisfying environment for employees now as well as in the future, and
3. Provide satisfaction to the market now as well as in the future.

The challenge is to accomplish all three objectives simultaneously.

One approach to doing so is called “balanced scorecard”. This proposed solution falls into the trap of trying to measure many, many things. It violates the second objective above in that when we measure many things, there will be some things that will look good and others that look bad. Depending upon the management style of the people involved, management can always find something to find fault with employees.

With TOC, we’re interested in ongoing improvement. We aren’t interested in measuring what is going well as much as we are interested in measuring what can be improved.

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Next Maximizing Profitability Events:

• January 20, 2009 from 1 pm to 5 pm
• February 3, 2009 from 1 pm to 5 pm

We now have 2 viewing options:

1. On-site in Denver
2. Live streaming video -- watch from you desk

Are you a Vistage/TEC member who would like your team to hear my Maximizing Profitability speech? You and/or you empolyees can attend in Denver at no charge or the LIVE STREAMING VIDEO is only $147 per company. More information at http://theoryofconstraints.eventbrite.com/

First GROUP Boot Camp of the year: February 4, 5, 6, 2009 in Denver. More information at www.MafiaOffers.com. Limited to the first 5 companies!

PRIVATE and On-line Mafia Offer Boot Camps are also available. On-line boot camps are done at YOUR time schedule and PRIVATEs are scheduled at a mutally agreed time.

A Process Of On-Going Improvement (POOGI) - Part 28

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

What is the problem? Is it:

• Declining sales?
• Unrealistic expectations for increased productivity?
• No profit incentive payout?
• Low morale?
• The new no-overtime policy?
• Ineffective supervision?

TOC has cause and effect logic tools to determine which problems are causes and which are effects. To have the greatest impact on the business system, we don’t want to treat symptoms; we want to address what we call the “core problem” that is the cause of all of the symptoms.

The company’s objectives to “make more money now as well as in the future” and “provide a secure and satisfying environment for employees now as well as in the future” are currently jeopardized. The specific objective being addressed is improved productivity as measured by sales compared to total plant payroll.

The core problem is that company policies are in apparent conflict with the goal of secure and satisfied employees. Employee resistance instead of buy-in to the objective of improved productivity is a result.

What are the possible alternative solutions to such a problem? What are the criteria for a good solution? That is, how will we know if we have a good solution before we try to implement it?

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

NEXT Group Mafia Offer Boot Camp: September 24, 25, 26 2008 in Denver. More information at http://www.mafiaoffers.com/. There are also PRIVATE and On-line Mafia Offer Boot Camps. The July boot camp SOLD OUT and there is no group boot camp in August. Don't miss September!

Are you a Vistage/TEC member who would like your team to hear my speech? Here it is: NEXT Maximizing Profitability Event (no charge): September 23, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at http://www.viable-vision.com/. You can register by fax or on-line.

A Process Of On-Going Improvement (POOGI) - Part 27

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

The detailed buy-in process is:
1. Agree on the problem(s)
2. Agree on the direction of the solution
3. Agree that the solution solves the problem and brings the benefits
4. Agree on predicted negative side effects and prevent them
5. Agree on implementation obstacles and objectives to overcome them
6. Agree to implement the solution.

The step most often missed in the buy-in process is step one, agreeing on the problem.

Let’s use an example from a machine shop. See if you can apply the process. First, the background story:

This machine shop has sales of about $300,000 per month. Sales and the backlog have been declining slightly over the past three months, although a new large order of about $1 million is expected at any time.

This new order is on top of normal orders, so it represents growth. Morale of the workforce has been low recently, following the end of a quarter when no profit incentive was paid out and a new no-overtime policy was announced. Pay rates for the most skilled workers have been frozen for some time.

Supervisors in the plant are trying to implement a change in the work process to cope with the increased sales without adding additional people and have been getting resistance. In fact, productivity has decreased.

What is the problem?

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

NEXT Group Mafia Offer Boot Camp: September 24, 25, 26 2008 in Denver. More information at http://www.mafiaoffers.com/. There are also PRIVATE and On-line Mafia Offer Boot Camps. The July boot camp SOLD OUT and there is no group boot camp in August. Don't miss September!

Are you a Vistage/TEC member who would like your team to hear my speech? Here it is: NEXT Maximizing Profitability Event (no charge): September 23, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at http://www.viable-vision.com/. You can register by fax or on-line.

A Process Of On-Going Improvement (POOGI) - Part 25

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

There is probably at least one step in your sales funnel that is more expensive or uses more highly trained personnel. If so, that step can be managed just like a production constraint. It should not be wasted. In fact, it can become the control point for managing your sales funnel. Work should be released into the sales funnel at the rate the control point can produce. Essentially applying Drum Buffer Rope (DBR) to Sales.

If you are interested in more information about sales funnel management the TOC way, and the significant increase in sales and profits it can bring, we recommend you read “The Cash Machine” by Klapholz and Klarman. It is an easy to read novel that provides a story for the development and improvement of sales funnel management.

Also, read “Reengineering the Sales Process” by Roff-Marsh. This book explains how to apply the Drum-Buffer-Rope production scheduling methodology to managing the sales process and sales people. Both books can be found on our website with links to the lowest cost purchase option.

Please contact either Dr. Lisa or Brad if you're interested in having the co-authors present and discuss TOC and a process of ongoing improvement to increase sales and profitability with your company or one of the groups you belong to.

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

The steps to implement Drum Buffer Rope (DBR) are not that hard to understand or explain. The difficulity lies in applying it to YOUR specific situation. If you don't know how to do that or do it incorreclty, it could lead to the conclusion that -- TOC doesn't work.

We are going to take 5 companies through the process of implementing DBR remotely. We will explain each step and discuss any questions or concerns specific to your situation. This will be a 12 week program with one session per week. Each session is 90 minutes in length. All 5 companies will be on the same call to take advantage of learning from the other companies. During this 12 week program you will learn: to read the rest, click here

NEXT Group Mafia Offer Boot Camp: September 24, 25, 26 2008 in Denver. More information at http://www.mafiaoffers.com/. There are also PRIVATE and On-line Mafia Offer Boot Camps. The July boot camp SOLD OUT and there is no group boot camp in August. Don't miss September!

Are you a Vistage/TEC member who would like your team to hear my speech? Here it is: NEXT Maximizing Profitability Event (no charge): September 23, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at http://www.viable-vision.com/. You can register by fax or on-line.

A Process Of On-Going Improvement (POOGI) - Part 24

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

To describe sales as a process, we must define the steps of the process. Of course, these may vary somewhat between industries and companies, and may be described in more or less detail. One such list of steps for a sales process is:




Often not considered are the capacity of the sales process and the flow of work through the sales process. In the example above, the capacity of the organization is greater than where work is (snapshot 1) except in one place: engineering at 20. Is it the case that in your company you may have one or bottlenecks that slows your responsiveness when trying to win new customers? As in the example above, will such a bottleneck serve to further reduce the rate at which you win new business?

In snapshot 2, we’ve assumed we’ve doubled the capacity of engineering. Now the rate of sales through the sales funnel is limited by the capacity of Production prototype at 35.

No, sales funnel management is not rocket science. But few organizations—including machine shops—are managing their sales process.

To manage your sales funnel, you must (1) define the steps in your sales process, (2) determine the capacity of your organization to perform each step in a time period, and (3) measure how many prospects are in each step a particular point in time.


...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

The steps to implement Drum Buffer Rope (DBR) are not that hard to understand or explain. The difficulity lies in applying it to YOUR specific situation. If you don't know how to do that or do it incorreclty, it could lead to the conclusion that -- TOC doesn't work.

We are going to take 5 companies through the process of implementing DBR remotely. We will explain each step and discuss any questions or concerns specific to your situation. This will be a 12 week program with one session per week. Each session is 90 minutes in length. All 5 companies will be on the same call to take advantage of learning from the other companies. During this 12 week program you will learn:
to read the rest, click here

NEXT Group Mafia Offer Boot Camp: September 24, 25, 26 2008 in Denver. More information at http://www.mafiaoffers.com/. There are also PRIVATE and On-line Mafia Offer Boot Camps. The July boot camp SOLD OUT and there is no group boot camp in August. Don't miss September!

Are you a Vistage/TEC member who would like your team to hear my speech? Here it is: NEXT Maximizing Profitability Event (no charge): September 23, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at http://www.viable-vision.com/. You can register by fax or on-line.

A Process Of On-Going Improvement (POOGI) - Part 23

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints.

Last time, we discussed how having a "Mafia Offer", an offer so good that (1) your customers can’t refuse it and (2) your competition can’t or won’t match it -- had the potential to dramatically increase sales.

A Mafia Offer is another “technology” that is part of the Theory of Constraints (TOC), a holistic business process improvement body of knowledge developed by Dr. Goldratt, author of The Goal.

TOC is especially effective in machine shops. In fact, it is usually possible to develop an excellent Mafia Offer for a machine shop, especially if your competitors have long lead-times and poor due-date performance.

Here’s a test: do you and your competitors’ quote lead-times that you know have a low probability of being met just to get the order? If so, you have an excellent Mafia Offer. Would you like to find out what it is?

The process of implementing the internal changes a Mafia Offer requires is not trivial, but doing so improves sales closing rates from less than 5% to as high as 80%. Typically, additional sales people aren’t required, but sales funnel management is.

Why? Because having a Mafia Offer doesn’t address the following issues with your sales process:

• Prospects aren’t aware of you
• You aren’t aware of enough prospects
• You have difficulty getting in to see your prospect
• You have a long sales cycle
• You have difficulty quoting as many jobs as you would like
• Quote turnaround is too long
• There are peaks and valleys of booking sales.

Sales funnel management begins with realizing that sales is a process. As Dr. Deming said, “If you can’t describe what you are doing as a process, you don’t know what you’re doing”. Many companies abdicate selling activities to individual sales people, and then have understandable difficulty managing and measuring sales performance and effectiveness.

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

NEXT Group Mafia Offer Boot Camp: September 24, 25, 26 2008 in Denver. More information at http://www.mafiaoffers.com/. There are also PRIVATE and On-line Mafia Offer Boot Camps. The July boot camp SOLD OUT and there is no group boot camp in August. Don't miss September!

Are you a Vistage/TEC member who would like your team to hear my speech? Here it is: NEXT Maximizing Profitability Event (no charge): September 23, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at http://www.viable-vision.com/. You can register by fax or on-line.

A Process Of On-Going Improvement (POOGI) - Part 20

We are continuing our series based on The Goal by Eliyahu M Goldratt.

What are the problems associated with marketing and sales? A few of the typical problems include:

• To prospects, what you say sounds the same as your competitors
• You have nothing unique or compelling to offer that is different
• Prospects aren’t aware of you
• You aren’t aware of enough prospects
• You have a collection of sales individuals, not a sales team
• You have difficulty getting in to see your prospect
• You have a long sales cycle
• You have a low closing rate
• You have difficulty quoting as many jobs as you would like
• Quote turnaround is too long
• There are peaks and valleys of booking sales

Yikes! That is a lot of problems! Where do we start to improve marketing and sales?

We recommend you start with your market offer or as we like to call it, your Mafia Offer. Without differentiating yourself from your competitors, it is difficult to determine what else is wrong with your marketing and sales process, and how to improve.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Dr Goldratt offers his new book Inherent Simplicity at no charge, click here to get the details: http://www.scienceofbusiness.com/dr-lisa/eliyahu-goldratt/goldratts-new-book.aspx

2008 Odyssey Program. Click here to learn about the low cost life changing event for young adults. You WANT to send your kids to this! http://www.scienceofbusiness.com/events/2008-odyssey.aspx

NEXT Group Mafia Offer Boot Camp: July 30, 31, Aug 1 2008 in Denver. More information at www.MafiaOffers.com. There are also PRIVATE and On-line Mafia Offer Boot Camps.

NEXT Maximizing Profitability Event (no charge): July 29, 2008 in Denver from 1:00 to 5:00 pm at the Science of Business Training Center. More information at www.Viable-Vision.com

Also check out our FREE Theory of Constraints videos. New videos added weekly! http://www.scienceofbusiness.com/free-stuff/free-videos-audios.aspx

A Process Of On-Going Improvement (POOGI) - Part 18

We are continuing our series based on The Goal by Eliyahu M Goldratt.

You can also perform a sensitivity analysis to determine the breakeven level of T/CU. In this example, it would be the Operating Expense level of $615,000 divided by 2,912 which is $211.20.

Pricing with Throughput Accounting is much easier and potentially much more dangerous. It is easier because there is no such thing as “product cost” to calculate. Instead, each product is evaluated for its Throughput per Constraint Unit. And overall, for the business, the average T/CU must be enough to achieve the Net Profit goal. It’s dangerous because any amount of Throughput does contribute to the bottom-line, but there must be the discipline to maintain the T/CU average needed to achieve the Net Profit goal. Pricing to achieve incremental business is not for novices.

For example, say you are quoting a new job. You estimate it will take 50 hours of milling. The Truly Variable Costs are estimated to be $5,000. Here is your estimate:

Hours of milling 50
T/CU desired $258
Throughput desired $12,900
Truly Variable Costs $5,000
Total Estimate $17,900

We understand that this method is much different and you may have many questions. If so, and/or you would like help calculating T/CU for your business, please feel free to contact us.

If you’d like to learn more about Throughput Accounting, we recommend the following materials (which were also used in developing the discussion above):

• “The Haystack Syndrome” by Dr. Goldratt,
• “Throughput Accounting” by Corbett.
• "Maximizing Profitability" by Dr Lisa (hit the ground running w/ 3 hr audio and workbook)

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Next GROUP Mafia Offer Boot Camp is July 30, 31, Aug 1 2008!Also check out our FREE Theory of Constraints videos. New videos added very week! http://www.scienceofbusiness.com/free-stuff/free-videos-audios.aspx

A Process Of On-Going Improvement (POOGI) - Part 17

We are continuing our series based on The Goal by Eliyahu M Goldratt.

Let’s apply this to your business. In order to do so, you’ll need to make some calculations. First, write down your annual sales. Second, subtract the Truly Variable Costs (these include raw materials, outsourcing, freight in and out, and sales commissions). The difference between the two is your dollar Throughput.

From throughput subtract all of your fixed costs which we call Operating Expense. The difference is your Net Profit.

For example:

Sales $1,400,000
Truly Variable Costs -$650,000
Throughput =$750,000
Operating Expense -$615,000
Net Profit =$135,000

Let’s further assume that you have lathes and mills in your machine shop. You have identified that milling is your constraint resource. You have only two milling machines operating one shift. You have calculated the available capacity as:

Number of mills 2
Hours per year 2,080
Percent available 70%
Available hours 2,912

The 2,912 hours is how many “Constraint Units” you have available.

The Throughput of $750,000 divided by 2,912 hours is $257.55. That is your “Throughput per Constraint Unit” (T/CU).

What is the meaning of this number? The Throughput per Constraint Unit is the amount of margin needed per operating hour of your limiting resource to cover Operating Expense and achieve your Net Profit. It is the rate at which you make money.
...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.
Next GROUP Mafia Offer Boot Camp is June 25, 26, 27 2008!
Also check out our FREE Theory of Constraints videos. New videos added very week! http://www.scienceofbusiness.com/free-stuff/free-videos-audios.aspx

A Process Of On-Going Improvement (POOGI) - Part 16

We are continuing our series based on The Goal by Eliyahu M Goldratt.

Dr. Goldratt says it this way: “If a process of ongoing improvement is what we are after, which of the three avenues of Throughput, Inventory, or Operating Expense is more promising? If we just think for a minute the answer becomes crystal clear. Both Inventory and Operating Expense we strive to decrease. Thus, both of them offer limited opportunity for ongoing improvement. Both of them offer only limited opportunity for ongoing improvement. They are both limited by zero. This is not the case with the third measurement, Throughput. We strive to increase Throughput. Throughput does not have any intrinsic limitation; Throughput must be the cornerstone of any Process Of On-Going Improvement (POOGI). It must be first on the scale of importance.”

Therefore, to make decisions according to Theory of Constraints (TOC) and Throughput Accounting, we need to quantify a decision’s impact on these three measurements and then we will be able to determine the change in net profit and return on investment.

The role of the company’s constraint is fundamental for quantifying the decision’s impact on the three measurements. Thus, to identify which products contribute the most to the company’s net profit, TOC also advocates the use of the measurement of “Throughput per time of the constraint (T/CU)”. This method is much simpler than the product costing and it allows for fast decisions that are directly linked to the bottom line.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

Next GROUP Mafia Offer Boot Camp is June 25, 26, 27 2008!

A Process Of On-Going Improvement (POOGI) - Part 15

We are continuing our series based on The Goal by Eliyahu M Goldratt.

We have discussed some of the problems with Cost Accounting, yet only touched on the alternative, “Throughput Accounting”. We promised to explore Throughput Accounting in more depth, and explain how implementing its concepts will help you understand the rate at which your company makes money. We also promised to discuss how Throughput Accounting can influence pricing decisions.

We are discussing Throughput Accounting from the perspective of the Theory of Constraints (TOC), a body of knowledge developed by Dr. Eliyahu M Goldratt and others over the last thirty years to support a process of ongoing improvement.

The fundamental concept in TOC is that every real system, such as your for-profit business, must have at least one constraint. If it were not true, your business would produce an infinite amount of net profit. Because a constraint limits your business system from getting more net profit, then if you want more net profit you must manage constraints. These constraints will determine the net profit of your business whether they are acknowledged and managed or not.

TOC and Throughput Accounting introduce three measurements for increasing net profit:
1. increase Throughput (Sales minus truly variable costs such as raw materials),
2. decrease Investment, particularly in inventories,
3. decrease Operating Expenses (that is, fixed costs).

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.