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. 

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.

 

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?

Arm Yourself with Knowledge

The internet has provided access to entrepreneurial experts from across the globe. Information on opening, expanding or harvesting your business is readily available. However, entrepreneurs need to be willing to take the time to access the information and learn from what is available.

This may seem like an easy task, yet many business owners do not take advantage of the information available to help their businesses survive, thrive and grow. Knowledge is a competitive advantage, and the business owner who learns about the market place, how to capture that market place and maintain market share will win.

Market research and competitive intelligence is an ongoing research task for any business. The information is critical in maintaining an edge in the market, especially in this time of more aggressive business and global competition. Market research is an ongoing task, because markets are changing very rapidly and the pace of business has increased dramatically in the past few years. The danger for many entrepreneurs comes from feeling overwhelmed and overloaded by the amount of information one can obtain.

To help the entrepreneur with their market research, there are a few key questions to ask. Before you start, ask what decision will be made and how the information will be used. When engaging in internet research, give yourself a time limit for searching the internet. There may be times where you waste more time than you gain by searching for answers on the internet.

Once you begin to engage in research, look at the source being viewed. Who wrote the article, what is their authority or affiliation? How accurate or relevant is the information, what is the intent of the information and how reliable is the information?

While engaging in market research, 50% of the information should be sought from people. Interview or call your competition’s suppliers, any associations for your industry, merchant associations, customers or local reporters. Get a feel for what is happening in your industry, what changes are taking place and what are some of the needs in the industry. Be persistent in contacting and talking with industry informants.

The next 50% of the research can be done on the internet or the library. Begin by using a variety of search engines for the same topic. Some search engines to try are www.google.com, www.yahoo.com, www.ask.com, www.search.msn.com, www.clusty.com and www.vivisimo.com. You can search blogs, local clubs, chambers of commerce, economic development organizations and more. Additionally, a lot of information can be found on GIS Maps. Fort Smith has an excellent GIS department, and they can be found at www.gis.fsark.com. Lastly, if you are in search of regulatory information, you can go to www.Thomas.loc.gov, www.usa.gov or http://asbdc.ualr.edu/.

Other search options include: your competitor’s website, news sites, sites your competitors link to, blogs, patent applications, podcasts, Wikipedia or advanced search engine requests. While the amount of information is overwhelming, entrepreneurs need to equip themselves with information that will help the business win customers. In this information age, anyone can access the information they need for business. The challenge is being disciplined enough to seek out the information that is needed.

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.