Wednesday, July 27, 2011

July 27, 2011

Dear Kids,
    "Search for the excellence", this is a book published 10 years ago to tell people how to look for the smart people to work or partner with them to grow together.  In fact, uncle Alex opened a restaurant a few years ago after winning an Ontario lottery and decide to open a restaurant to grow his fortune.  Unfortunately, the restaurant was only opened for 3 months and the restaurant was sold to someone because the business was lack of tenant.  As a matter of fact, if you can run a successful business, you need to be very smart.  In the old economic studies, there are three very important things for the basic business operation.  The first one is land, labor and the management.
     The first one is the land which means that the business man is going to purchase the land or lease the land to run his business.  If you are going to purchase the land, you need to calculate the mortgage payment which may be affect the long term investment or short term cash flow issues.  If you are going to purchase a building which including the land that will give you a long term appreciation of the value of the building and the land value will go up for a long term if your business can support the debt payment.  There are a lot of businessmen would like to lease the land and the building because they want to reduce the risk factors in order the business failure so that they can move away from the premises.  Most of them they will have a Net lease or Gross lease concept so that they know what they are paying.  A Net lease concept is that the rent that you are going to the landlord will be the rent only and the amount will be net to the landlord.  In the other words, you need to pay the rest of the expenses relating to the building and the land such as property tax, maintenance and the heating utilities etc.  However, each lease is difference due to the negotiation between the landlord and the tenants mutual agreement.  The other one is the gross lease which the rent payment will include all the land and building expenses.  Therefore, if you are the landlord, you like the Net lease and if you are the tenant, you would like the gross lease.  Again, you need to understand your position before you can get the good negotiation.  Most of the time, you have the number of years that known as term such as 10 years term lease or 5 years term plus five years.  During the term of the lease, you will enjoy the rate of the rental from low to high and also you can move out after 5 years term if you think the coming rate is too high.  Option is the term in the lease to tell you that you can leave with a good term after the lease expired or you have the Option to stay in the lease for a negotiable terms and conditions.  The landlord will make use of you to pay the mortgage until the value of the land and building going up before selling it.  Most of the case, the tenants will stay or moving out so the location and address of the business will be affected.  Nowadays, there is a term to encourage the tenants to purchase the building as lease to own so that the tenant can purchase the building in a set price.  You need to evaluate that you need more moeny to invest in the business or the property to balance the cash flow.
     The second one is the labor which is the most important because you need people to generate the income for you and your company.  Uncle Alex's restaurant was hired a friend who he knew for so many years.  He was the chef of the restaurant and he controlled the food quality.  As we all know that the hospitality business, the Government will send the inspector to check the conditions of the kitchen all the time and uncle Alex gave him the instruction for him to take care.  The chef was not happy about it because both of them are friend for a long time.  He walked out the restaurant without giving the notice and Alex was struggling hiring chef all over and finally he sold to someone with profit.  In this story, we learn a number of things as following: 1. Never hiring a friend as a working partner because "Business is a War" that you will only care about the profit and fight with your competitors all the time.  The language will be difference from what you are using in a "Happy hours" bar after 5:00pm because you are relaxing yourself.  The way how to present yourself is totally different from the "Business War".  In business, every penny or dollar you loss that will come out from your pocket. Most of the cases, a good friend in a business will become an enemy.  The walked out Chef and Alex are good friend now because they have no relationship in the business.  You need to know the business before you run the business because most of the employees will make the mistake to test your IQ to see you know your business well.  If you don't know the business, they will start making mistake or delay the process that will cost a lot of money to the company.  Therefore, good company will give you the training so that you would make little mistake instead.  Company will have a test to see how well to deal with people so that to avoid the people walk out from the job without any notice.  Personnel department is the department to select the excellence to service the company, the company expects the employees to make money for the company not to lose money instead.  The employee's quality will affect the company a lot.  Most of the company will hire good people and train them to stay if possible.  Most of the smart people will set up their own company or will promote to the high position.
      The last one is the most important things among all the above because Management is how to put the things together.  A good management can turn around a bad business into good because the lease is cheap so that the overhead is low.  Labor force are good enough to the business therefore, there is no over spending to the company.  The benefit can be split to the labor force so that they will put more effort to the business in the future.  They will treat the customers well so that there will be a lot of returned customers because of the good service.  Always remember that all the businesses are depending on "People".  People business is where the money is.  Management is the techque how to put all the factors together and the problem solving.  In the olden days, "Customer is always right" because they bring the money to you which might not be right today.  For example, a drunken man came to your hotel trying to rent a room and I would reject his offer to stay because he might affect the other people if he creates problem later on.  So, the smart management is depending on your experience, knowledge and education background.  I believe that the way how you deal with them will be difference from each other due to the different background.
     Getting into a job or business, you need to be smart up and treat yourself as a boss and what you expect from the people you hired.  A simple example, you hire a cook who doen't know what to do because lack of the experience.  Another example, you hired a girl who always on the phone and shouting to the co-workers all the time creating a bad atmosphere all the time.

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