Tuesday, December 29, 2009

Good article on why you need to do more than cost cutting

As the saying goes......a small business can't save it's way into prosperity.

Here's an article on how to focus on the things that will help your small business succeed in good times and bad.


Tuesday, December 22, 2009

Is 2010 the year you make your small business work for you?

If you own a small business, or considering starting or buying a small business, this article could give you a path to make your life as a small business owner more enjoyable.

Let this be the year you finally change your relationship with your business.

It will be difficult, you have habits and assumptions that won't be easy to set aside. If you adopt a few principles the day-to-day, hour by hour decisions will be easier, more predictable and less stressful . Many small business owners are so bogged down in the details of their business they have never really given much thought to the principles that guide their business. Even though they haven't thought much about their business principles rest assured the business is being run by certain principles. For instance, is your pricing based on cost plus? Or based on competitive position? Is your business principle is to always recommend what is best for the customer or is your policy to recommend the the customer what is most profitable for you?

Here are a few principles I suggest you consider in 2010:
  • Start every business day by spending 30 minutes planning your day. Do this first every day.
  • Commit to recommending what's best for your clients and customers, not what's best for you.
  • Treat your employees respectfully. Good employees won't work long term for you if you are disrespectful. Employees who will work for a disrespectful manager long term are not employees you want.
  • You have to be fair and honest with your employees but you don't have to be friends with them.
  • Treat your suppliers and vendors respectfully and fairly. You can be tough without being a jerk.
There it is 5 principles that might help you run your business without interference from "situational ethics". If you apply the above principles in every situation you reduce the number of decisions you need to make, your employees will be easier to manage, your suppliers and vendors will more cooperative and your customers will trust you more which will lead to more long term customers.

Thursday, December 10, 2009

The Myth of..... "If I had more capital I could grow faster and be really, really profitable."

Here's a request we often hear from small business owners:

"Can you find me an investor? If we had more capital we could grow like crazy and make a ton of money!"

My next question to the business owner is "What would you do with $100,000 if someone wrote you that check today?"

Wow, you should hear the answers I get to that question. Here are a few examples:

"I'd pay off my debts so I could get a new loan." Huhhhh???

"I'd lower my prices so I could sell more stuff." Huhhh?

"I'd pay off some of my personal debts so my wife would stop yelling at me." That one I understand!

Even for the biz owners with answers that sound reasonable the exchange often goes something like this:

Me, "What would you do with $100,000 if someone wrote you that check today?"
Biz Owner: "I would expand my business."
Me, "How would you expand it and when would your expansion turn into additional profits?"
Biz owner, Blank stare.

The bottom line is, in all my encounters (and there are very, very many) with small business owners who say they want or need additional capital less, than 5% have a plan that makes any sense whatsoever. And then they wonder why a bank won't give them small business loans.

The vast majority of small business owners are really very bad at planning. The reasons for it are many but I think the primary reason is they have little or no idea what pieces of their businesses create the results.... good or bad.

Most small business owners are hard working, they show up for work every day and hope that working hard will result in success. Unfortunately there is very little correlation between hard work and financial success. What you need is hard and smart, not just hard work. If you own a small business spend more time on detailing out a logical and well thought out business plan. A business with a good business plan is much more profitable and infinitely less stressful than a business that wings it day-to-day. Start now, create a 1 year plan for 2010. Simple 1 year plan, week by week. Do it NOW, your deadline is to have it done by January 2, 2010. Give it a shot, what if I'm right?

Once you have a plan have someone who is successful in small business look at your plan. Don't worry about being wrong. Worry about getting better, your health and your bank account will thank you.

Have questions about what should be in your plan? Shoot me questions related to your business in the comment section and I'll try to answer them.

To paraphrase a famous business saying "A weak plan with mediocre execution will always beat no plan over the long term. A good plan well executed will always beat a great plan poorly executed."

Sunday, December 6, 2009

Small Business owners need to build and preserve wealth

Here's a good book to help you understand what it takes and an option for protecting the value of your business once you've created value from your business. It's worth the time if you're serious about your business. Click here

Wednesday, December 2, 2009

Steps to Starting a Small Business in a Difficult Economy...Part 2

In Part 1 Steps to Starting a Small Business in a Difficult Economy I gave you 6 things to nail down before starting or buying a small business. Assuming you've done your homework on those 6 items (or more likely you've probably decided to ignore at least 4 of the 6) it's time to move to the next phase... THE BUSINESS PLAN!

My job here is to give you the real world, not the theoretical text book version.

Here are some things to consider when putting together a business plan:
  1. The more you lie to yourself the more likely you are to fail.
  2. The business plan is for making good decisions not making good presentations.
  3. Don't act on your business plan until it has been reviewed by and you've received comments from a successful small business owner. Ignore their recommendations at your own peril.
  4. Know the numbers inside and out. If you can't recall from memory your sales, costs, working capital requirements, inventory, cash, etc, then you've haven't worked on your plan long enough.
  5. Your business plan is not a tool to figure out how successful you can be, it's tool to make sure you don't fail.
Too many small business owners think the business plan is a necessary evil for banks and lenders. If you're smart you'll make your small business plan your best friend, a friend that can keep you from making dumb or careless mistakes.