Harvest Time

Every business has a beginning, and every business owner needs to know how they want to end their time in the business. Like the cycle of life, entrepreneurs invest time in giving birth to businesses, yet they spend little to no time planning the end. Few entrepreneurs think far enough into the future to include plans on how they want to harvest their business, which takes as much planning and attention as the beginning.

“Entrepreneurs are like farmers, they plant their seeds and work hard to ensure a healthy and plentiful crop. What they need to remember is to create a plan for harvesting or exiting the business. Farmers need to know how and where they are going to sell their crop. Likewise, entrepreneurs need to have a vision for when and how they would like to exit their businesses.”

Regardless of how long the entrepreneur wants to stay in the business, there will be a point when he or she will leave. Whether through selling or retiring the business, each business needs to be as prepared for that day as the first day. Three basic approaches to the exit include passing the business down to heirs, selling the business or closing the business.

Many entrepreneurs start businesses in the hopes that they will be able to pass the business down to their children when they are ready to retire. There have been many famous companies that have passed the family business down through several generations. While passing one’s business down to the next generation sounds easy, planning needs to occur in order to ensure a smooth and successful transition. Business owners need to prepare the next generation with the skills and knowledge needed for a good succession.

In preparing a succession plan for a family owned business, there are organizations devoted to assisting the business owner and his family for a successful transition. The Family Enterprise Center located at the University of Arkansas – Fort Smith is dedicated to assisting family owned businesses through multiple generational issues. Additionally, there is a national nonprofit, the Family Firm Institute, who provides information and research concerning the family company.

If passing the company to a chosen heir is not desired, cashing out of the business through  selling the business is the most popular exit plan. Unlike preparing a successor for the business, an entrepreneur can sell the business in different ways.

The first option in selling a business is to take the business through an IPO (or initial public offering). Taking the business public where shares are bought and sold on the stock market is not an easy option. The business is subject to the rules and regulations of the Securities and Exchange Commission. This strategy takes time, strict business practices and the entrepreneur needs to be aware of the rules surrounding the sale of the owners share in the company. Typically, businesses that need large sums of funding to conduct research or are going through a rapid expansion phase are candidates for an IPO.

While very few business owners opt to sell their business interest through stocks, many business owners sell their businesses to another buyer as his exit plan. There are different types of sales, so business owners should consult with a CPA and a lawyer to ensure the proper due diligence and valuations are conducted.

Lastly, business owners can simply opt to close their business. Whether retirement has arrived or the business is not in a position to be sold or passed down, the entrepreneur has the option to end the life of the business.

While no one desires to draft their own wills, business owners seldom enjoy preparing for their exit from a business they have put so much time an effort into. Knowing how and when to exit the company allows the entrepreneur the goals and milestones needed to ensure a successful transition. Additionally, the entrepreneur strengthens the business foundation for future success.

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.

 

Human Resource Blues

What do you think is the most commonly found difficulty in owning and running your own business? Some may say access to capital, access to markets or managing a work-life balance. Ask a handful of business owners and you’ll find that managing employees is their toughest challenge.

From hiring, firing and counseling through the dramas humans attach themselves to, maintaining a happy, productive and cost effective workforce in any business is challenging. To make the challenge more interesting, the workforce is seeing dynamic differences in the generations represented within most companies. These differences have frustrated both ends of the spectrum.

Yet, one of the most commonly seen problems with employees is the tie between salary and production. Business owners have seen trends in employees arriving at work with an entitlement mentality. Often times, employees assume their work is solely for the benefit of the business owner. In reality, most business owners earn less per year than the bulk of their employees.

Employees go further in their entitlement mentality, buy expecting yearly pay raises and bonuses. However, the amount of work being produced by the employee seldom increases. In order for a small business to prosper, the business needs to prosper financially in order to pay an increased salary.

Michael Alter with Inc.com recently wrote about employee compensation. He noted, “most employers don’t have a problem giving raises to their employees if the employees are doing their part to ensure business growth and profitability.” Michael went further by stating: “However, in many companies that’s a big ‘if.’ When profitability plateaus, employees generally interpret flatline compensation as a sign of disrespect instead of making the connection between compensation and job performance.”

One way business owners can escape from the employee entitlement mentality is by creating a performance incentive program. Rather than paying employees their salary and bonuses automatically with the assumption they he/she would earn at least a cost of living raise every year, turn the table onto them. If an employee wants a raise or bonus, develop an incentive program with clearly defined goals the employee has to reach in order to receive more money.

In establishing goals for the employee, make sure they are realistic, fair and have value for the company. Communicate with the employee throughout the year about where they are, what they have achieved and what may be going wrong. Have conversations with the employee at least once a quarter or more.

As a business owner, also utilize noncash rewards for good work being produced. In between the pay checks, if an employee or a team rises above the your expectations, take the time to thank them. You can get creative in ways to encourage their work. From buying lunch to putting a thank you card on their desk, small personal incentives often go much further in motivating than cold cash.

Finally, remember employees typically seek work that is rewarding to them rather than seeking large sums of money for their time. Creating an environment where they feel appreciated and motivated to deliver the productivity the company needs is a win-win situation.

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?

Lies of a Business Owner

Entrepreneurs come in all shapes and sizes. Their businesses are as different as their DNA at times. Some businesses take off and grow quickly, while others move along at a steady pace. While entrepreneurs are different and unique, they face similar challenges and problems commonly found in business. Entrepreneurs will often rely on the same “I’ll tackle that myself” mentality; however, seeking outside assistance is also an option.

According to Guy Kawasaki, the top ten lies entrepreneurs express to others include:

            1. “Our projections are conservative”
            2. “The market is forecasted to be $50 billion by 2010”
            3. “Amazon will sign our deal next week”
            4. “Key employees are set to join us as soon as we get funded.”
            5. “We have no competition”
            6. “We need you to sign a nondisclosure agreement”
            7. “Our larger competitors are too big to be a threat”
            8. “If I could get ‘one of them’ grants for my business, then I will be set”
            9. “Our patents make our business defensible”
            10. “All we have to do is get 1% of the market”

If you are an entrepreneur and have said any of these statements, you are not being completely honest with yourself or with others about your business. Before opening a business, do the necessary research to see if your business idea will be able to be supported by the market you are seeking. Ask potential customers what they think about your product or service. If you need a prototype to demonstrate to others, then you need to have one created.

Being an entrepreneur is hard work. If it were easy, more people would open businesses rather than work for someone else. Since running a business requires a lot of hard work and takes a  desire to overcome the risks involved with business ownership, why not take the time to start the business right? Understand how you intend to finance the start of the business (knowing there are NO grants available to start businesses), how to acquire the skills you may lack in running your business and how to get the market to buy from your business.

Entrepreneurs do not need to know everything. Assistance for entrepreneurs comes in many different ways; entrepreneurs need to seek information from industry experts as much as possible. While seeking information and assistance, entrepreneurs also need to be aware of what information is coming from what source. If you seek information from your best friend, his/her advice may not be accurate or right for them to express towards you. If a friend said you have no chance to break into the market you are seeking, how are they to judge that for you unless they are an industry expert?

When seeking the help of professionals, entrepreneurs need to “interview” those companies and representatives that you would be hiring. You are hiring them, so seek the assistance you need from them. Don’t let those firms tell you what you should want or need. 

Information is a critical component to being a business owner. The more information and training you obtain for your business, industry, market and skills the more equipped you will be as the leader. Commit to yourself that you will no longer make excuses for your business; rather you will seek what is needed to make your business a 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.

Balancing Act

You are a business owner whose day begins well before the sun rises: you need to get the children dressed and to school, attend a 7:30 meeting, get started on email via the Blackberry, get to the office to find employees having problems, return voicemail messages and discover business operations that need addressing. This is all before 9:00 a.m. During the day, you have customers, vendors and your CPA begging for your attention before your children need to be taxied to tutoring or soccer, your spouse needs help at home and you still need to engage in business planning, balance the day’s financials and review business performance. How do you balance life’s needs in running a business?

While there are countless resources on the subject, people continue to feel the pressures of managing their personal, family and business lives. Each day puts direct and indirect pressure on our lives to act a certain way, obtain certain goals, and engage in certain activities. We receive countless messages on what our lives should look like, feel like and achieve. Add those pressures to the reality of your day, and you have a much stressed out situation.

To combat life and work toward balance, the Mayo Clinic has the following tips to consider:

1. Keep a log. We all have 168 hours a week, no more or no less. Try to track everything you do for one week and how much time it takes (even brushing your teeth) so that you can account for the 168 hour week. Review your week and see what activities you are doing for necessity, that you enjoy and that you could live without. For the “live without” items, can you delegate or outsource those at work and/or at home?
2. Learn to say no. Whether it’s a civic club asking you to spearhead an extra project or your child’s teacher asking you to manage the class play, remember that it’s OK to respectfully say no. When you quit doing the things you only do out of guilt or a false sense of obligation, you’ll make more room in your life for the activities that are meaningful to you.
3. Leave work at work. With today’s global business mentality and the technology to connect to anyone at any time from virtually anywhere, there’s no boundary between work and home — unless you create it. Make a conscious decision to separate work time from personal time.
4. Manage your time. Organize household tasks efficiently. Doing one or two loads of laundry every day, rather than saving it all for your day off, and running errands in batches are good places to begin. A weekly family calendar of important dates and a daily list of to-dos will help you avoid deadline panic. Include your children in adding their calendar items too.
5. Communicate clearly. Limit time-consuming misunderstandings by communicating clearly and listening carefully. Take notes if necessary.
6. Nurture yourself. Set aside time at least once a week (preferably more) for an activity that you enjoy, such as walking, working out or listening to music.
7. Set aside one night each week for recreation. Take the phone off the hook, power down the computer and turn off the TV. Discover activities you can do with your partner, family or friends, such as playing golf, fishing or canoeing. Making time for activities you enjoy will rejuvenate you.
8. Protect your day off. Try to schedule some of your routine chores on workdays so that your days off are more relaxing.
9. Get enough sleep. There’s nothing as stressful and potentially dangerous as working when you’re sleep-deprived. Not only is your productivity affected, but also you can make costly mistakes. You may then have to work even more hours to make up for these mistakes.
10. Bolster your support system. Find a mentor (you can have more than one) to help you with your business. This gives you an outlet for the various challenges you will face in being a business owner away from others in your life who may not be able to give you the support you need.