Crazy Times, Conservative Practises

We’ve been watching the economy closely since the start of the year, and the economy has looked more like a basketball game than a predictable trend. The brightest Ph.D.’s have resorted to educated guessing in their economic forecasts as the variables associated with this downturn are unpredictable and new to trendsetters.

Regardless of the messages we’re given by the media or forecasters, business owners need to prepare. While the stock market may have crashed weeks ago, the effects of that crash will not be known until early 2009 or later. Planning for “worst case scenarios” now will prepare you and your business for what may or may not happen in the future. Amongst the planning you’ll engage in, take stock in the connections and hidden opportunities that you may not have taken the time to investigate.

The Duct Tape Guru offers the following advice for harvesting new business in hard economic times: 

1) List the people you know now. What professional communities, networks, and social groups are you part of? Make a list of contacts. If they’re close, talk to them about your business goals. If they’re more distant contacts, send them an email or phone call to remind them of who you are and what you do. Ask around if anyone needs what you have to offer. Your core networks often harbor unexpected opportunities.

2) List the people you knew in the past. Dredge up old clients, leads, colleagues, schoolmates, and other contacts you haven’t talked to in a while. Send them a brief hello and blurb about your business. If possible, offer them a service or product discount that they can either use themselves or pass on to other people they knows.

3) Seek the strangers you don’t know yet. Do you blog, Twitter, podcast, or use any other form of media to broadcast the contents of your brain into the vast world of the Web? If so, this is a key time to promote you. Leave intelligent comments on blogs you admire with a link to your homepage. Create a new or unexpected form of media—a video, for example—to enliven dormant fans. Promote yourself in discussion forums. Update your Facebook and LinkedIn profiles. Drive organic, quality attention to yourself and your business.

4) Understand the things you need. Are you connected in any way to products that people need, no matter what? For example, household cleaning supplies? Personal hygiene supplies? School and office supplies? These industries will stay steady through a bad economy. If you sell these supplies, think about beefing up your stock of bargain supplies or generics. If you own a website, think about how you could monetize the promotion of recession-proof supplies. If you provide a recession-proof service, think about how you can improve your market position and drive the kind of business you want your way.

5) Know the things that hurt. What is your client’s “pain,” and how do you address it? Chances are, people will hurt more during a recession. How can you improve your services to address pain even more effectively? For example, if you’re a therapist losing your client base after marking up your prices (by necessity) to $95/hour, think about the alternatives you could offer. Could you facilitate a support group for $40/session/person? Could you offer mini-tune-ups to cash-strapped clients for $25/20 minutes? Could you offer package discounts? What about a cheaper email or IM counseling service?

Recessions don’t have to dictate an end to your fortunes. In fact, if you stay flexible and creative, opportunity abounds. 

Starting a Business

Opening a business and being one’s own boss is as much a part of the American dream as owning a home. In fact, being self employed or an entrepreneur is gaining a great amount of attention in this country’s economy. Citizens of this country are blessed with the freedom to start a business and enter an endless number of markets.

However, opening and running a business is not as easy as many make it seem. If you have flipped channels in the middle of the night, a funny looking man with question marks on his clothes lure others into the idea that there are numerous funds available for people to start their own businesses or that you can earn thousands working from home. This gentleman along with other copy cats are selling you untruths in order to sell their own books.

Business service providers, like the Innovation and Entrepreneurship Center, wish there were easier ways to finance a business like the infomercials suggest. However, the reality is there are no free grant funds for people to start or grow their businesses. There are a small number of technology grants available to companies willing to engage in research and development for departments of the Federal government. These grant funds are highly competitive and come with many strings attached to the funding.

Moving forward on a business, the entrepreneur needs to be prepared to address the financial needs for the business. The entrepreneur needs to be able to sustain their personal finances first before moving toward opening the business. Rarely is a business profitable as quickly as the entrepreneur may think. Planning to sustain his/her personal finances is the first step in starting the business.

In the planning process of opening the business, the entrepreneur should prepare conservative financial statements. These financial statements should identify how much capital is needed to start the business. If the company requires more funds than the entrepreneur has, then he needs to seek outside financing to help open the doors. Usually, a business will seek out a business loan to help pay for the materials, inventory or equipment needed to operate the business.

The first place an entrepreneur should look for additional capital in starting their business is through what is commonly called “friends, family and fools (fff).” This form of capital is the easiest to find and obtain. After seeking support from friends or family, bank loans are often sought after. If your business is entering a fast growth industry and your capital requirements are great, then venture or angel funding may be needed.

Regardless of the type of capital source the business seeks, the entrepreneur needs to prepare a business plan, sound financial statements, and form a solid management team for the business. In addition to preparing the business for capital, the business owner must prepare their own financial worthiness. A good credit score or a cleaned-up credit report will be needed for the business.

The first step towards understanding business capital comes with learning as much as possible about the options, opportunities and the requirements of money and one’s business. Utilizing resources like the Small Business Development Center or the Innovation and Entrepreneurship Center are good places to start.

Start-Up Mistakes

With the help of Jonathan Sapir of Silver Tree Systems, below is a list of common business start-up mistakes. While some of mistakes listed may not apply to you, some of them are relevant. Plenty of challenges arise during the life of a business, avoiding as many of those challenges as possible will save you time and money. Learn what not to do before your own money is involved.

1.   You think that your product must be awesome because your buddies are telling you it is the greatest thing since sliced bread.  Unless they are willing to hand over cold cash to use your product, they are just being supportive and nice. Additionally, do your buddies represent the real market you are trying to reach?

2.  You are finding that your product is so versatile it could solve just about any problem.  This is a clear sign you don’t have anything worthwhile. No single business, not even Wal-Mart, supplies the needs of everyone for everything.

3.  You have found a client, but in your euphoria you have forgotten to ask yourself if this client is an anomaly.  You need to make sure that the client represents a real market, otherwise you are just building a custom solution. You need to be thinking about future customers.

4.  You keep coming up with ideas for all the many different ways you can make money with your product. You can sell it to Wal-Mart, Amazon, Google etc.  If you are not focused on something specific, you are dead.

5.  You choose to work with clients that don’t have a lot of money.  Sure they like your product, but they can’t afford to pay you enough for it, so why focus on them?

6.  You choose to work with a small client first instead of one that will be able to help you get more clients later on.  Just because Joe’s Fish & Chips is using your product doesn’t mean Motorola will be impressed enough to try it.

7.  You think you can’t work with a “real” client early on because it’s too risky.  But you aren’t selling them the product – you are selling them the idea of the product.   If you can’t sell them the idea, you are never going to be able to sell them the product.

8.  You start building the product before you have a (real) client identified.  Again, if you can’t sell the idea, you are definitely not going to be able to sell the product.

9.  You think you can’t sell the idea until you have a product.  This is a major killer – you think that as soon as you have feature X or Y, you can start showing people your idea. One more time – if you can’t sell the idea, you can’t sell the product.

10.  You don’t want to stop or throttle development when you aren’t really sure you are on the right track.  You just want to keep on going, because you just know that soon the product will be so awesome that it will dazzle everyone with its brilliance.   If people aren’t buying the idea, you better stop wasting money now until you have figured things out.

11.  You think that just because your product can solve a generic problem like “collaboration”, you have a sure-fire winner.  You have to ask yourself how your product really stacks up against the competition that is already out there and why people would buy yours, and if they would, for how much.  Often, the current solution being used is simply good enough, and even if yours is significantly better, no one is going to buy it.

12.  You underestimate the power of a penny over free.  If something is free and barely does what you need, you will stick with it versus something that’s much better but requires you to pull out your credit card.

13.  You think that just because someone says they would definitely use your product that they actually would use it – or that they would pay to use it.  Talk is cheap.

14.  You think that just because people say they would pay for your product (and actually mean it), they would pay enough to keep you off food stamps.

15.  You think that just because there is a company making money in your field, there must be a lucrative market that you too can take advantage of.  But there may not be room for more than one successful product in this particular area.  And the incumbent has a much better chance than you do of succeeding. 

Entrepreneurial Lessons

Many seasoned business owners lived through what is commonly known as “start-up screw-ups,” or common mistakes made in early business ownership. However, business owners of all maturity levels fall victim to several common business problems. The one common issue the IEC sees through business owners is a desire for easy solutions to business troubles. Unfortunately, easy solutions are often a dream. If owning and running a business were easy, more people would leap into ownership. In an effort to take charge of your business, Guy Kawasaki suggests the following five tips:

1.       Focus on cash flow. Cash is what keeps the doors open and pays the bills, so knowing how cash works along with your profitability is critical. You need to get your costs under control, understand how much it takes to break even and how much you need financially to keep the business alive.

2.       Make a little progress every day. Don’t believe in the big-bang theory of marketing: a fantastic launch that created such inertia that you flew to “infinity and beyond.” No more. Instead, focus on making a little bit of progress every day – whether that’s making your product slightly better, increasing your skill in one small way, or closing one more business deal. The reason the press writes about “overnight successes” is that they seldom happen -not because that’s how all businesses work.

3.       Try stuff. If you are relying on luck alone, you better re-evaluate that mindset. While luck is a big part of many successes, don’t get too upset when you see less qualified businesses succeed. Secondly, luck favors the people who try new things and take analyzed risks. Be patient, talk with customers and try different products or solutions.

4.       Ignore schmexperts. According to Guy Kawasaki, “Schmexperts are the bad combination of schmucks who are experts – or experts who are schmucks. When you first launch a product or service, they’ll tell you it isn’t necessary, can’t really work, or faces too much competition. If you succeed, then they’ll say they knew you would succeed.” If you believe in your products or services, try it.

5.       Never ask anyone to do something that you wouldn’t do. This goes for customers (“fill out these twenty-five fields of personal information to get an account for our website”) to employees (“fly coach to Mumbai, meet all day the day you arrive, and fly back that night”). If you follow this principle, you’ll almost always have a good customer service reputation and happy employees.

The Economy Blues

 

Lately, it has been hard to help entrepreneurs without talking about the economy and the roller coaster Wall Street saga. While the trickle down effects of the actions on Wall Street and Congress will be revealed in the coming weeks and months, business and consumer confidence has decreased sharply.

One entrepreneur likened this time in the economy to the movie “Airplane.” As the passengers are asked to prepare for an “emergency landing,” the passengers actually begin to panic. In this economy, you are going to see a lot of panic happening; however do not be discouraged by what is around you. Above all things, be aware of your market and industry, watch your profit and loss (P&L) statements, and continue innovating.

StartUp Nation shares in the confidence that is needed by business owners now. “Checking out the newspapers, magazines, and television news over the last few weeks, I think we are being told to ‘assume crash positions.’ But, we’re innovators and inventors, we don’t follow the herd. In fact, we lead the herd.” Business owners need to stay motivated and move forward.

As the public feels more stressed, it’s the entrepreneur’s job to stay cool, stay smart and keep working. If there’s going to be a solution to this economic recession, it will be the innovators who  continue creating that will carry the country out of this problem.

Now is the time to use your business leadership skills to keep your business going strong. Evaluate your expenses, operations and market demands. Like waiting for a hurricane along the coast, prepare now, make adjustments in your business now and revisit your strategic plans now.

 

Law of Attraction

“You are what you believe in” and other well know clichés have gained the attention of business leaders as the Law of Attraction has seen a rise in awareness. Marketing professionals have subconsciously worked with laws of attraction as they implement concepts and strategies to build profits for companies. Business leaders are now seeing a correlation between their attitudes and the health of the company.

The Law of Attraction is a relatively simple concept. It simply implies that you attract toward you what you think about. Your dominate thoughts will manifest and move you. For example, have you driven down the road and fixated on an object in front of you. While your subconscious knew to avoid the object, did you find yourself driving directly for that targeted object?

As a business leader, do you have a target focus? Do you know who you need to attract to your business to achieve great sales, profits or exposure? While running a business of any size, if the leader of that organization does not have focus, direction or a purpose, then the business is not going to attract what it needs to succeed.

Are you a business owner who has been in business for a few years, not seeing great success with the business but enough to get by? Have you developed a negative attitude about the business, or are you skeptical of trying anything new since you have “done that already?” Do you realize that others involved with your business, whether employees, customers, contractors and so forth, take on your same attitude about the business whether you are verbalizing it or not? Being a business leader is a tremendous responsibility and the Law of Attraction applies to your leadership style.

Whether you believe in the Law of Attraction or not, as a leader in the business, you set the tone for all others to subscribe to. If you have a negative outlook, know that no one else who comes in contact with your business is going to have a higher opinion of the business than you. If think the world of your business and believe in it through the up and down cycles, then others around you will too.

In utilizing the law of attraction in your business’ marketing, the Small Business Trends Radio show suggests that you differentiate yourself from the rest. Think and believe of your business as sensational and dare to be different if you can. Being the same as everyone else does not draw the attention of new customers.

Secondly, becoming an expert within a niche in your industry will begin to attract the right types of customers for your business. This may not work for everyone, so analyzing your business within the market is needed. However; creating a niche for the business will attract new customers.

Lastly, capture your customers through entertainment. Speak to them emotionally, as people become less defensive when they have invested their emotions to the situation. Again, dare to be different if you can.

While psychologists and philosophers argue about the validity of the Law of Attraction, there are things you can do to lead your company in positive ways to attract the types of customers that will support your business venture. Ask yourself what you value, where your attitude lies with the company and what you can do different in marketing your company that will have impact on your business. Running a business is hard work, but it can be fun work. What are you going to do for yourself?

African American Business Owners

According to the US Census Bureau, there are 1 million Black owned businesses in the United States. Black businesses account for over $100 billion in annual sales, and African Americans have over $800 billion in expendable income each year. Minority business enterprises (MBEs) are a rapidly growing and increasingly important segment of the U.S. and global economy.

From 1997-2002, the total number of U.S. companies increased by 2 million. According to the Minority Business Development Agency (MBDA), over 50% of this increase was accounted for by minority-owned firms. MBDA notes that minority-owned businesses are diverse, and participate in a wide variety of industries like financial services, health care, construction, transportation, and other services.

However, despite the impressive growth in the number of U.S. minority firms, MBEs must increase their size, scale, and the economic viability of their firms if they are to compete effectively in the global economy. In this day of the global economy, minority businesses must be assertive and innovative competitors who will not fear or retreat from globalization.

In the MBDA report, “Minority Business Enterprises Mastering the Supply Chain: A Perspective,” research suggests that businesses who understand the supply chain concept will be more equipped to bring their businesses to the next economic level. The report, available at www.mbda.gov, demonstrates how minority businesses are able to grow their companies by coping with the challenges of local, national and international competition.

If minority businesses learn about and master the three levels of supply chain management, new opportunities await their businesses. Supply chain management is defined as the “planning and management of all activities involved in sourcing, procurement, conversion and logistics management activities. It also includes the coordination and collaboration with channel partners, which can be supplies, intermediaries, third-party service providers, and customers.”

The three levels of supply chain discipline according to the MBDA include:

• Managing the fundamentals of supply chain, which includes identifying the risks that exist within the supply chain. Once the risk is identified, the business owner may take steps to mitigate those risks.
• Selling the value of a shorter and more reliable supply chain. By reviewing the supply chain, the business owner can see where efficiencies are needed and where partnerships may be formed to decrease costs yet increase turn-around deliverables.
• Transcending today’s supply chain. By acquiring the skills to get ahead of today’s supply chain trends, moving toward higher value positions and markets and staying ahead of the competition, the business owner will see greater results.

The three levels of supply chain discipline lead to business owners to a path of continues study and learning. Staying abreast of the market and trends happening within the market and with technology will lead to business decisions that are relevant. Minority businesses have great opportunities with their businesses, and taking charge of the business is the first step to success.

E-Myth Revisited

Several business owners and entrepreneurs in the Fort Smith region have been reading the book The E-Myth Revisited. Watching several entrepreneurs transform their approach to their businesses has been priceless to the IEC. The great thing about Michael Gerber’s book is that almost any business owner can read through its wisdom and apply at least one idea to help their business.

One such idea is considering one’s business as a reflection of oneself. Gerber notes “If your thinking is sloppy, your business will be sloppy.” This idea drills down to every aspect of one’s business. If you don’t have a plan, then your business won’t have a direction. If you don’t research your market or talk with customers, your business will reflect limitations because of that. If you don’t keep up with your market or industry by continuously learning, your business will get left behind. If you are greedy, your employees will reflect your values of greed. If you are unorganized, no one else in your business is going to be more organized than you.

If you don’t understand what it takes to run a business, your business will reflect that. However, there is hope, and you can change. The key is the business owner needs to be willing to change and make needed improvements to the business. Whether it is cleaning an office and getting organized or documenting and instilling policies or procedures for the organization, business owners need to be willing to take a sober and unbiased look at their businesses. If your business has cash-flow problems, will a line of credit or bank loan fix the problem or is there something else that needs to be reviewed? While complaining about business problems is easy, one needs to stop pointing the finger at others and take responsibility for what you see in your own business.

FYI – if you are interested in excellent buisness information, visit http://www.e-myth.com/blog/. This is an excellent blog to help you with your business.

Entrepreneurial Finance: The Function of Financial Statements

Money is the bottom line. We start, grow and invest in businesses for money. All the pains, highs and lows of business ownership are to provide for the business owner’s family, lifestyle, employees and so forth. Money allows entrepreneurs to open their business, and it is the key component to keeping the business open. While we may master our inventories, be the best at the services we offer or are brilliant at research and innovation, each business needs money to survive.

Despite the simple objective to make money in business, it is very common amongst entrepreneurs and business owners to overlook their abilities to manage the business finances. Many business owners will engage a bookkeeper or an accountant to set-up and manage the books. Others will buy financial accounting software programs and do their best to understand the power behind those types of software. However, a solid understanding of the business financial statements is critical for all business leaders regardless of how the reports are generated.

The good news is that regardless of the legal structure, type of business or size of business, the same basic financial statements apply. The financial statements are to serve as a mechanism of internal fiscal control, a tool to attract investors, a snapshot into the fiscal health of the company, a way to capture fraud before the business suffers major losses and a means to evaluate the overall functions of the business.

The first financial statement that a business needs to regularly generate is the income statement (also known as the profit and loss statement). Most businesses will want to generate this report on a monthly basis and compare the information with the previous months or to the same month from the previous year or two. If the business hasn’t opened yet, then the entrepreneur will want to generate an income statement for the first twelve months based on projected numbers they think the business will achieve. These projections need to be realistic and will be based off the market research completed during the business planning process.

The first section of the income statement will review the reporting time period’s gross revenues or how much money the business made during that time. Business owners need to include the total dollar amount of the returns and allowances the business gave in that time. The net revenue is found through subtracting the gross revenues from the returns. This is how much money the business made in the given reporting period.

The next section looks at the cost of goods sold. The business should list each major line item that contributes to how much the business pays for the products being sold. For instance, a manufacturer of widgets would track the costs of raw materials, and a retailer may wish to track the direct costs of inventory. Service oriented agencies can total the cost of delivering the service or they may opt to track overhead expenses in the next section.

The third section on the income statement tracks the operating expenses of the business (also known as overhead). Here the business should track salary expenses, which should include salary, payroll tax and any fringe benefits that the company will pay. This section should also include; rent or mortgage expenses, property taxes, sales taxes, depreciation expenses, utilities expenses, advertising expenses, insurance expenses, and any regular expenses incurred by the business.

The last section of the income statement will look at other expenses the business has on a regular basis. Typically, this is where loan interest is noted. While the business owner writes one check to pay off a loan or debt, the principal and interest are traced separately on the financial statements.

To finish the income statement, take the net revenue from section one and subtract that from the total cost of goods sold, operating expenses and other expenses. The resulting number will be your profit or loss for the reporting period.

The second financial statement is the balance sheet. The balance sheet lists all the assets and liabilities for the company. In simplest terms, this is a snapshot of the financial health of the company. A healthy business will show a well rounded balance of assets to liabilities.

On the balance sheet, current assets should be listed first. Current assets includes how much the business has in the bank, accounts receivable, inventory or any other account the business has money available in. Additionally, the business should also list all fixed assets it has. Under the fixed assets section, the business should list the value of all the land that it owns, the value of the building (if owned), value of any cars or major pieces of property owned by the business. The fixed assets should also note the cost of depreciation for any property owned by the business as well. The total fixed assets will be the value of the assets minus the depreciation.

Next, the balance sheet will list all current liabilities. Current liabilities include accounts payable, notes payable (credits, etc.) and taxes payable. Additionally, the balance sheet will list long term liabilities, which include building mortgage payable, equipment loan payable or other large debts owed by the business. Lastly, the owner’s equity will have its own line item on the balance sheet.

The magic of the balance sheet is the total assets added together, should equal the total number of liabilities plus owners equity added together. If the two numbers do not match, then a problem exists in the business or in the preparation of the balance sheet.

Whether the business owner hires help to establish and maintain the financial statements and books or whether they seek to maintain this information on their own, it is important to understand how the numbers work and what the numbers mean. Watching the business financial statements will help guide the business along in its progress, prevent fraud, alert the owner to business trends and show the business owner how the business is working for him or her.

What’s Your Story?

Stories have played a critical role in society since the beginning of the human race. Without stories, much of our histories would have been lost through the ages. Even today, stories are a critical component of our lives. We hear stories each time the remote control is grabbed, we tell stories about our weekends or our children, we share what is personal to us in stories. Likewise, your business has a story. More amazingly, your business story can be told  in 30 seconds. Whether you have less than a minute or 15 minutes, the business owner needs to identify and be prepared to tell that story.

BJ McCabe, a business coach and storyteller, notes that her job is to teach high level businessmen or woman how to tell stories – business stories. “Each of us has a lifetime of experiences that have helped to inform us of who we are, what matters and shapes how we interact with others. The primary importance a of story (as I see it) is to help us make sense of our experiences.”

Carmine Gallo (in Business Week’s article “Mastering the 30-Second Pitch”) notes that when telling your story you should answer the following four questions:

1. What problem do I solve?
2. What is my service, product or company?
3. How am I different?
4. Why should you care?

What is your business story? What can you teach me about your business so that I will want to ask you for more stories and information? People really do want to hear your story, what is keeping you from sharing it?