Be an Ethical Entrepreneur, Marketer, and Business Builder

What your small business needs to do to weather the economy…

December 17, 2008 By 4 Comments

It’s amazing what lessons we learn in tough times that are quickly forgotten in times of growth. Below is my list of necessary remedies for ensuring your business can thrive in a tough economy.

  1. Have cash available – Check out my blog about cashflow first. In essence, if your receivables are high or you have an issue with billing or you just have a slow month, make sure you have access to cash so you don’t have to miss payroll. That doesn’t help team member morale much. Discipline yourself to build up a company savings account with at least enough money to cover 1 payroll. Another way to help cashflow is to pay for performance instead of just hourly or flat salary.
  2. Improve Marketing – Don’t cut back on your marketing unless that marketing isn’t producing results. More and more people are skipping the Yellow Pages and going to the internet. Or they’re going to the yellow pages simply to get your phone number once they already know who they’re going to call. How much are you spending on yellow pages? Is it paying off? Invest time into making your website better if that’s an area that drives leads. Try some direct mail campaigns. Place an offer along with your radio and print ads to measure the response. If it’s working invest more money into it. If it’s not, cut or eliminate it completely. Focus on referrals!
  3. Cut Expenses – Use better technology (VOIP, Quickbooks Payroll, Online bill-pay, online backups). Improve employee efficiency with detailed procedures and performance based incentives. Search for better deals before purchasing anything. Shop from multiple vendors and keep a database of vendors available for each part so you know where to get the best deals.  Find out from ALL of your vendors if they have quantity and pay-quickly discounts (i.e. pay in 10 days to receive 2% discount instead of in 30). Cut out some of the owner perks if necessary.
  4. Ask your team for help – It’s a team and they’re all working with your customers every day. What can they bring to the table as potential cross-marketing, upgrade, and add-on opportunities that you’re not taking advantage of right now? Get everyone involved so they “buy into” new programs. At the same time, work to improve the productivity of your team.
  5. Sell to your existing customers – They know and trust you so how else can you help them?
  6. Know your numbers -Taking a page from Michael Masterson, each leader should only have 3 numbers to focus on.
    1. Your office leader needs to know total receivables, outstanding payables, and bank balances.
    2. Your sales leader needs to know # of outstanding leads, # of new sales, and average dollar sale.
    3. Your marketing leader needs to know # of leads coming in from each marketing project, # of sales from each project, and average dollar sale.
    4. Your service leader needs to know # of work orders completed, # of work orders outstanding, and # of customer complaints.
  7. Acquire competitors and/or complimentary businesses – If you have the top 6 under control, it’s time to really take advantage of the economic climate by acquiring more businesses. Competitors are perfect since you can cut out nearly all of their overhead expenses by absorbing them into your business. Generally if they’re for sale they haven’t done as good of a job as you so they should be ripe for new marketing, cross-marketing, add-ons, up-sales, etc. A complimentary business can help you do the same thing. You may not get as many synergies as quickly, but with a complimentary business you can now sell the service your new business provides to your existing customer base and vice versa.
  8. Avoid starting a business – When you start a new business, you have a lot of expenses up-front and NO customers. You have no immediate cashflow, no systems, no marketing, no referrals coming in, no name recognition. Nothing. By relying on an established business as your primary source of cash you don’t have nearly the time invested as starting from scratch. And on day 1 you have sales and money coming in.

There are lots of “little things” you can work on to improve your business to make sure it’s resilient in times of economic slow-downs. However, don’t get bogged down in the details! This was a quick overview of just the most basic things every business should be doing. Obviously all of this is true in good times and bad so when your business starts picking up, don’t forget to stick with it!

To your success, Bryan

Filed Under: Business Accounting, Ethical Marketing, General Business Tagged With: , , , , ,

Nearly half of Americans think 2008 will go down as one of the worst years in American history…

December 13, 2008 By 2 Comments

Wow. Were the past 12 months that bad for you?

As I was reading the Wall Street Journal on my Kindle this week I came across an article that references a Wall Street Journal/NBC news poll indicating that nearly half of the people surveyed think 2008 will go down as one of the worst years in US history. Since 90% of the respondents indicated that the economy has gotten worse in the last 12 months I’m going to assume that’s the primary reason everyone hates 2008. I must say, as a young entrepreneur who has put everything on the line to buy a small business and move across the country 8 months ago, I’m a bit shocked…

Here’s why I’m a bit shocked that people think things are so horrible:

  • I sold my house in Pennsylvania in about 3 months at a profit when I’d only purchased it 24 months earlier.
  • I easily got financing (at 95%) for my new place in New Mexico.
  • I’ve secured several commercial bank loans and still have access to low interest credit.
  • My business is about to have the highest grossing year of revenue in its 60 year history.
  • We’ve hired 3 new people this year and anticipate more growth in the next 12 months.
  • I bought and resold a motorcycle in less than 2 months at 30% profit this summer.
  • My personal net worth has increased more in the last 8 months then it has during the previous 25 years of my life.

Now the news isn’t all rosy:

  • At last count my stocks, mutual funds, etc. are down about 33% this year. However that doesn’t really bother me since most of my money is invested in other areas. Now I have an amazing opportunity to increase my stock holdings and take advantage of severely discounted businesses on the stock exchange.
  • I haven’t been able to sell my sports car. It’s a 2006 G35 coupe. Bright red. Not exactly the vehicle people “hunkering down” for a depression would be buying.
  • My debt has increased more in the last 8 months then it has during the previous 25 years of my life. However, the right kind of debt isn’t bad as long as it’s used for assets and they are appreciating.

So what does this all mean to you? It’s very simple, are you bracing for a recession, depression, or worse? OR are you finding the opportunities that are now greater than ever out there.

Right now you can buy businesses, houses, stocks and mutual funds cheaper than probably in the last 20 years. Particularly with the housing market, if you have good credit, with the tightening restrictions on lending, guess what’s going to happen? More people are going to have to rent. Housing prices are down and rental prices are going to start going up (rental rates don’t seem to have changed much in my area yet). Is there a more perfect formula for residual income and profiting from rental properties then that???

As Brad Sugars pointed out recently – In Las Vegas, where the housing market has been particularly hard hit, he talked to a realtor who said he’s getting killed because no one is buying anything. Shortly thereafter he spoke with another realtor who said he has more work then he knows what to do with. With all of the foreclosures, banks are scrambling for good realtors to sell for them.

Which guy or gal are you? Is it all doom and gloom or are you picking out the opportunities that are abound?

The possibilities that are created in 2008 may be the ones that allows you and I to create more wealth more quickly than ever before. And what’s the worst that can happen? You could buy a business and fail? You could buy a stock that goes bankrupt and lose your investment? You could buy a rental property that doesn’t get rented out? Well, here are a few quick ways to minimize the chance of any of those things happening.

  1. Buy a business – Make sure it’s a staple that everyone will need no matter what’s going on in the economy. If you have few or no competitors, even better. If you already own your business, buy your competitors and/or complementary businesses that can benefit from your current facilities and customer list to spread overhead between several entities keeping costs low. What’s your company’s niche??? The most important part is the PURCHASE PRICE. Buy it cheap. Make sure you tell the seller that the economy is horrible and they better take your offer while it’s still on the table. ;-)
  2. Buy a house – If you’re looking for a rental property and you’re not too worried about tax deductions, single-family dwellings are always the best to start out with. Young families and couples are abound so there’s always a need. And with the current credit markets those people will need to rent. Keep in mind, just like with a business, what’s unique about your property that will make people want to stay there? Again, the purchase price is the most important part. If you can keep your costs down with a low mortgage then your profits will be that much better. Make sure you tell the seller that the economy is horrible and they better take your offer while it’s still on the table. ;-)
  3. Buy stocks – I’m not a big fan of mutual funds. I bought my first one when I was 14 and never had great success. In essence you’re paying extra to have someone pick stocks for you and put them in a nice, neat little package. Do your homework. Learn about the stock market and particularly business valuation. Read The Warren Buffett Way. Buy stocks that have more cash on hand then their current market capitalization and also have strong cashflow. If you want to be even safer, invest in ones that are still paying a dividend. Historically they generally fair the best.

Consider this for a minute – retail sales after Thanksgiving this year are up 7% over last year! That’s right, last year when the stock market was soaring and everyone was making money and unemployment was low we bought less stuff at Christmas sales then we did in this recessed year of 2008…  Hmmm… are you seeing the opportunities yet?

Don’t be that guy who remembers when Buffalo Wild Wings and Netflix were trading for $21/share and if you’d have only put a few bucks into those stocks you’d be rich now… If you still think I’m a bit “off”, since the sky is obviously falling, check out what the greatest investor in the world, Warren Buffet, thinks about the economy.

To your success in making 2009 your most profitable year yet, Bryan

Filed Under: General Business Tagged With: , , , , , , , ,

Should I take on a business partner?

December 7, 2008 By 2 Comments

No. I mean, Yes. Well sometimes…

Here’s the rule of thumb – You only take on a business partner if ABSOLUTELY necessary. Here are the only reasons it would be necessary:

  1. They have the money you need. – This is self-explanatory and if you’re young, have educated yourself, and willing to work hard is the number 1 reason to have a partner. You need cash to get started. Obviously “young” is relative, however if this is the point where you are in your life and you just need some cash don’t let that stop you from taking on the partner. Below I’ll get into a few ways to ensure this partnership will work.
  2. They have the experience you need. This one isn’t actually too different than the one above. Maybe you have money, maybe you just have the right opportunity. The best example of this would be if I have great leadership talent yet can’t cook and I have a great opportunity for a profitable restaurant. If I’m going to recruit a top-notch, dedicated chef chances are they’re going to need a piece of the action (I’d recommend offering them profit sharing instead of ownership, though). Notice I did not say “you want to have a restaurant”. Never forget that you don’t buy a business “for fun”. You buy it for its profit potential. Once you’re rich you can then start having fun with all of your money on “risky” businesses.
  3. They have the connections you need. The best example of this would be the entertainment industry. You can be the most talented singer, comedian, actor, or artist on the planet but if you don’t know the right people chances are you aren’t going anywhere. Granted, with the advent of the internet, Myspace, Facebook, Youtube, etc. etc. etc. you have a lot more avenues for people with those connections to find you. After all, if you put a video on Youtube that gets 10 million hits, you can make a pretty good argument that your talent is truly entertaining.

Again, you need to evaluate your situation and determine if you REALLY need their cash, experience, or connections (or all of the above – but if you need all of that, then what do they need you for?).

You’ve determined that you do need a business partner so here are a few things you should setup BEFORE getting into business together. Do not wait until 2 months, weeks, or days down the road when issues arise. The easiest way to avoid conflict is to work it out ahead of time. Here are the 5 things that are crucial to a strong business partnership.

  1. Have an exit plan up front. This is something I reviewed with my business partner as soon as I knew it. My plan was to sell the business within 2 years or at least step away from the business and train someone else to replace me. In other words, if I can make money without working all day every day then I’ll keep the business.
  2. Have a Growth Plan in place so you know where money will be reinvested. – When the business starts doing well, you may think the best investment of all the money is back into the business whereas you partner might think we’d be better off having more company perks or taking additional distributions. If you clarify that up-front, it makes things a lot easier when the time comes.
  3. Have a “cashflow crunch” plan in place. – This is the one I forgot. Some business owners, such as Brad Sugars, say “Always pay yourself first” however most business owners, myself included, have difficulty with that. I can live on next to nothing and I always have savings so I’m more comfortable paying all of the bills first and then paying myself. If you’re business partner isn’t on the same page then you need to know that up front.
  4. Document each person’s responsibilities. – If you have a partner both of you can’t be doing the same thing. If your partner is just injecting cash but is going to have no say on the operation of the business then you need to spell that out up front. Keep in mind the 3 leaders every business needs since most partnerships based on experience fall along those lines. Make sure you indicate what happens if one or the other person doesn’t keep to their responsibilities. You may want to include working hours, benefits, paid vacation time etc. in this area as well.
  5. Bring issues up as soon as reasonable. – If there is something you didn’t discuss up front that you think is going to be a problem, do your research on the problem so you have all the facts, and then bring it up. Don’t wait months for it to fester or wait until your partner finds out from someone else. If you’re not comfortable discussing difficult topics with him or her, he or she shouldn’t be your partner in the first place. In my opinion this is the MOST important aspect of finding a partnership. You cannot possibly plan out or think of every problem that may arise. However, if you can reasonably trust and discuss things with each other then you are much more likely to make it work.

Brad Sugar’s once told me that “if you want a partner, get married.” Though when he was getting started he had to take on partners to get the cash he needed and he’s done alright for himself since then. So don’t avoid partners at all costs – especially if the cost of not taking on a partner is not getting that business – However, educate yourself properly on the person and the synergies you have together. And you better make sure you do the five things listed above to keep everything positive for the term of the partnership.

To your partnering success, Bryan

Filed Under: Business Ethics, General Business Tagged With: , , ,