How Fast Are We Going, Anyway?

Now that you’re actively collecting data and making measurements and attempting to improve your business, how do you go about reporting your progress? This is one of the most difficult decisions that business owners and manager have to make. What do we report, how should it look, how often should we update, and who’s going to do all this updating in the first place?

First, start with the most important measures for the unit being measured. That is, if you’re measuring your customer service department, then decide what are the few important measures on which we should concentrate for that department. If you’re preparing a reporting mechanism for the board of directors, then you’re going to look at the whole company.

You can only concentrate on a handful of measures at one time, so pick the three to six most important ones for the area in which you’re working and go from there. As you make improvements to one area, you can substitute another area that has become a bigger problem. As you get better at working with these data points and trends, you can add more measures.

One way to display the information is in the form of a dashboard. Just like in a vehicle, you have a dashboard with the few important data points that you need to successfully “manage” your transportation system. You don’t want to get a ticket for speeding, so you have a speedometer. You don’t want to run out of gas, so you have a gas gage. There are other gages on your dashboard showing the status of various systems in your vehicle. Some are gages, some only tell you when you have a problem, like the check engine light. And unless you’re Penny, when that light comes on, you need to check your engine. If the light is off, you can assume you’re engine is operating fine. Together, these different measurement systems indicate the status of your transportation system. And the real beauty of a dashboard is you can see it and understand the status of your system in just a glimpse. Similarly, your company dashboard needs to be arranged to use different types of gages so that it’s logical and displays the whole system status quickly.

Here’s an example of a corporate dashboard from computer networking company F1 Solutions, here in Huntsville. F1 ownership and management decided what was really important to measure and set their tech staff at programming the measures into an automatically updating system that displays their performance relating to response times and customer service.

Unless you’ve got a talented tech staff, you probably won’t be able to create a fancy dashboard like F1. You don’t need to either. For a bunch of tech guys, this is a problem that needed to be solved. You probably don’t have resources like this available at your company. What you need to figure out is how to display the information in a meaningful way that allows you to properly manage your systems with the least amount updating.

If you need help with your measurement systems, give us a call.

Connect with Chris on  Google+  LinkedIn  Twitter

What’s the pain?

It’s in my knee right around…no, not that kind of pain. What’s your customers’ pain?

One way you can get the upper hand on your competition is to really consider the way your customers do business. What are their issues? How do their buying processes match up with your selling processes? How do the quantities of product they need in an order match with the quantities that you sell in a unit?  Maybe you should ask.

These economic times require you and your team to be better than you were in the past. Most industries are slow or slower than four or five years ago. If you don’t have the kind of business you’d like, maybe you aren’t asking the right kinds of questions.

Have you considered having a conversation with your customers? I know, that’s pretty radical, but if might just work. Sit down with them in their office and ask what you can do to make doing business with your company easier. Is there anything about our ordering and delivery processes that cause you problems? Is there anything we can do better?

You may find that a simple and easy tweak to your process will provide a huge benefit to your customer. Maybe you pack 15 units to a case and your customer uses them in quantities of 8. Can you change your box size to accommodate one more unit so that your customer can get a better utility out of your ordering system? Perhaps it’s something in the way your paperwork doesn’t give them a piece of information that would make their life easier. The point is, you won’t know unless you ask.

We’re talking about making changes to your system to make life better for your customer. Maybe your willingness to consider a small change to your system is just the kind of loyalty that makes them a customer for life. Maybe your system tweak makes them love you enough so that your price is no longer a major factor in the buying decision. Maybe they would be willing to accept an x% higher price if you could make this simple change.

You will not be able to accommodate every whim and desire of your customers. But you never know what little thing about the way you do business that really irks them unless you ask. In these difficult economic times, your company has to be better than their other alternatives. Being assertive and positive in wanting to make the relationship better is a great way to make your customer relationships better.

Recipe for Success: Get Creative

Many small businesses are struggling to survive in this difficult economy. Restaurants have been particularly hard hit by rising raw material costs. Prices for staples like butter have increased significantly over the past year. And most small restaurants can't really buy in bulk due to lack of adequate storage space or food spoilage issues. So how do they survive without passing on higher menu prices, which many owners fear will drive away customers in a fragile market environment? They get creative.

Sourcing food products from local sources allows owners to buy just what they need. While the price may be slightly higher on a per unit basis, you only buy what you need. Buying from the large restaurant supply firms means you buy most products by the case, even if you can only use half that much. For example, a raw material is available from the national vendor at $2.00/lb. but must be bought in 8 pound cases. A local provider will sell any amount of the same raw material, but at a price of $2.25/lb. The unit price for the national seller is 12.5% less.  However, the restaurant can only use 5 pounds before the product goes bad. The total cost of the raw material from the national seller is $16.00, versus only $11.25 for the same usable quantity from the local provider, an almost 30% reduction in actual cost.

What ways have you found in your business to save money? If you have some interesting tips for other small businesses, please share them here. 

For a more complete discussion, view my white paper: Weathering the Economic Storm.

The Fog of Fear

Unfortunately, I see this all too often in coaching and consulting clients.  Either they’re hoping to start a new business or they’re in crisis.  The former is way easier to fix than the later.  But either way, the fear has them in a head lock and they can no longer think rationally.  In fact, they can no longer see the situation clearly, which is why I call it the ‘fog of fear’. 
 
Fear is an ugly thing.  It makes us do things we would never do in a more rational time.  It causes us to make poor decisions, or more often, fail to make important decisions about our business.   Failing to act in the business world doesn’t mean that nothing happens.  It just means that you have failed to take an active part in managing your business.  You’ve chosen instead, to let your business run itself.  What I call Management by Abdication, is the worst kind of management.  Serious operational and financial problems don’t just go away…they usually get worse when left to fend for themselves.
 
Why does this happen?  Why do normally logical and engaged managers and owners get lost in the fog?
For new entrepreneurs or those still ‘hoping’ to get started, it may be an inability to pull the trigger.  They don’t have enough information or don’t understand how to tilt the odds in their favor by using standard financial and analytical tools.  Three simple tools; the income statement, cash flow report and break-even analysis, what I call the Three Tools of Financial ViabilityTM, can help hopeful entrepreneurs evaluate their business model for viability.  In other words, will real people pay real money in sufficient quantity to allow you to meet your goals?  Without some way to determine if your business model has a good likelihood of being successful, many people just can’t seem to pull the trigger.  And frankly, without any kind of success likelihood, why would you ever take the risk?
   
But the fog I’m really talking about is the fog that grips existing entrepreneurs when their business is in crisis.  Owners or managers frequently get consumed by the fear of the unknown consequences.  Maybe they haven’t run across this particular problem before and aren’t sure how to proceed.  Eventually, as the problem grows in magnitude, the fear turns into a fog that can’t be navigated.  Owners just sit, paralyzed into inaction with fear.  This is when they lose their business.  Taking no action, or inappropriate action, the business suffers further and a downward spiral sucks them into the abyss of failure.
  
If you find yourself in this situation, get some outside help.  Use your advisors or mentor to help you see the most appropriate response to the situation.  If you need to hire a financial professional, do it.  The alternative may be loss of your business.  Usually these problems are nearly as bad as you’ve made them out to be.  A little professional advice or strategy will probably help you get back on track to profitability.   

Jim Blasingame: The Small Business Advocate

Jim Blasingame, author and host of the award-winning radio show The Small Business Advocate Show, was in Huntsville to speak to the Women's Business Center of North Alabama today.  The lunch-time keynote was inspiring and informative.  Jim spoke to a full house crowd about the changing nature of business and the relationship that companies have with their customers.  

One of the sponsors of the lunch was Fred Holland and WTKI.  Jim's radio show is carried locally by WTKI, and the radio station bought copies of the book for all in attendance at the event today.  Jim's 2006 book, Three Minutes to Success, is packed with small business lessons that entrepreneurs can read in three minutes.  Short lessons for busy people.  The book can be found on-line and in bookstores.

Jim was kind enough to pose for a photograph for my blog. 

More Top 10s for Huntsville

Huntsville ranked 7th among the top 15 regions in the latest Site Selection magazine survey of site selection consultants.  Huntsville is one of the smallest cities on the list, but is still recognized as an attractive location to locate a new business or expand an existing business.  The survey queried the site selection consultants on their pick for the top metro areas for investment.  The top 10 cities on the list were:

1. Dallas, TX

2. Atlanta, GA

3. Charlotte, NC

4. Houston, TX

5. Indianapolis, IN

6. St. Louis, MO

7. Huntsville, AL

8. Charleston, SC

9. Greenville-Spartanburg, SC

In addition, Alabama was ranked 10 in the top 10 states with best business climates as ranked by Site Selection magazine.  While Alabama was bested by other southern state like North Carolina, Tennessee, South Carolina, Georgia and Louisiana, landing in the top 10 is still a prized location.  Alabama ranks especially well in the aerospace, automotive, wood products and green energy industries. 

  

As an entrepreneur and one who works with and watches the entrepreneurial community, these rankings confirm the positive environment that residents of Huntsville recognize as business as usual in Alabama and especially in Huntsville.

Let the Tsunami Begin!

No, not the destructive wave of dark water that destroys everything in its path, but the wave of start-ups that will spring up all over the country bringing jobs and creating wealth.

  

With the change in political direction brought on by the mid-term elections, expect to see a change in attitude and expectations from business owners and potential entrepreneurs alike.  As I coach with business owners and speak with entrepreneurs, the thing I’ve been hearing over and over is their fear of the unknown and how they are waiting on the sideline for a more certain future before investing their cash.  In fact, I’ve heard more than a few times an even more dire fear from business owners about the direction of the economy and our tax structure based on the actions of our current congress.

  

The new Congress will not be seated until January, but the change in direction coming will give some certainty to business owners who have had none lately.  Business profits have been generally good but we haven’t seen the investment in new plant and equipment or expansion that typically follows because of that uncertainty.

  

While I’m a strong conservative, this site is not about politics.  It’s about helping entrepreneurs turn their dreams into profitable businesses.  The political climate has cleared a little and the future may seem a little brighter for business interests this morning.  The key for hopeful entrepreneurs is to continue to do your research and test your idea for viability.  Don’t think that just because the political environment has changed that you’ll automatically be successful.  It doesn’t work that way.  And a bad idea is still a bad idea even in a great economy.

Elevator Pitch

What's your elevator pitch?  Do you have an engaging appeal?

Most entrepreneurs have really lousy elevator pitches.  They drone on and on listing the services they offer without ever truly engaging the recipient.  What they fail to realize is IT'S NOT ABOUT YOU.  It's about your client and what's important to them.  If you are listing services and features, you'll put your potential customer or contact to sleep faster than reading the Windows program manual.

Every once in a while I'll hear a really good elevator pitch.  Think yours is good?  If you live in North Alabama, why not enter it in the BizTech Elevator Pitch Contest on November 19th.  You'll need to get your entry in by Today, so get to it.  You can download an entry form and get all the contest rules by going to www.biztech.org .

Don't feel like entering the contest or don't live in North Alabama?  Then let's hear them here.  Send me the link to you giving your elevator pitch on YouTube and I'll give you some feedback.  If it's a real winner, I'll post it here on my blog.

Let the pitches begin...

Rocket City Sitters - Madison, AL Startup of the Year!

         

My friends at Rocket City Sitters were honored by the Madison, Alabama Chamber of Commerce recently as the 2010 Start Up of the Year.  From L-R are Nick Weseman, Adrienne Stephens and Erica Weseman.  Congratulations on the award, you guys are doing a great job!

RCS provides short-terms childcare in the Huntsville-Madison county area.  they hire only trustworthy sitters who are certified to provide quality care for your kids.  They also work with organizations such as churches and businesses and events like a wedding or reunion.  No more need to stay home on a Friday night because you can't find a sitter.  Contact Rocket City Sitters today to schedule a sitter by phone at 256-272-1727.
 
Check out Rocket City Sitters on-line at www.RocketCitySitters.com .

Store Management Complete

Store Management Complete, By Frank Farrington. Published originally in 1911, this version 1922 by Byxbee Publishing Co.
  

I found this little book  (it's 4.5" x 7.5") in an antique shop in Decatur, Alabama a few weeks ago.  I love books and couldn't turn down a nearly 90 year old instruction manual for running a retail operation.  It's a funny little book, but also very interesting in it's common sense approach to business.  For entrepreneurs, it lays it all on the line in the first sentence of the book.

"It is the man himself that makes or mars the business."

Couldn't have said it better myself.  Mr. Farrington goes on to say that a business can have every advantage, properly stocked shelves, great location, good price, excellent marketing and promotion, but if the business owner doesn't know what he's doing, he'll run it into the ground in no time.

It was really the last sentence on the first page that I found most interesting:  "A merchant needs to be an all around man, a man who knows much about many things, who can himself do any part of the store work in need be, in order to show an employee how it should be done, and a man who can make himself agreeable to people and exhibit a high degree of proficiency in salesmanship."

I think he just described a small business owner.  In modern language, someone who can wear many hats.  Doesn't that describe most any small business owner's job?  Before you can, in Mr. Farrington's world, become a financier, you have to start small and do most of the actual work yourself.  As you grow and develop your business into a real business enterprise, you can start to hire employees to do the actual work and you can manage the direction and finances of the business. 

As a financier, you are managing the investment that is your business.  As a merchant, you're managing the store and the people and doing much of the actual work.  Just like Horace Vandergelder, the grumpy half-a-millioniare merchant in Yonkers, New York in Hello Dolly, we envision a merchant with a tweed suit and an apron.  He's the classic business owner and manager.

This book is in remarkable condition to be 88 years old and is delightful in its language.  I'm sure I'll have much more to say as read Mr. Farrington's Store Management Complete.

Sins of Entrepreneurism

The dream of business ownership is like an addiction running through the veigns of entrepreneurs.  We crave the start-up and break out into cold sweats at the very thought of a new business opportunity.  When done properly, a start-up is a wonderful thing, flourishing with profits and cash flow.  When mangled and mismanaged, the beauty tarnishes and becomes a dirty needle driving us to a metaphorical over dose.

So what happens that causes us to lose our way and take what we thought was such a wonderful idea and turn in into such a mess?  For many unenlightened entrepreneurs, they take their eye off the contest and start coveting the prize.  Instead of focusing their serious intention on building an enterprise, they lose focus and just create a job.  

For some, being self-employed is just fine.  Just understand that being self-employed is not a business.  Being self-employed is still trading hours for money.   The dream of entrepreneurship for many is realizing fame, fortune, liesure, travel and a healthy cashe of possessions.  That’s the prize for creating a well-run enterprise.   Let me say up front that I too hope to realize those prizes.  There’s nothing inherintly wrong with any of those things.  But they only come at the end, after you’ve created the enterprise.  The problem is, many hopeful entrepreneurs take their eye off the start-up and start focusing on the prize, before the enterprise is even established. For these people, the prize becomes a poison and bitter reality instead of the comfort.

For these lost entrepreneurial souls, fame turns out to be the dog remembering you, for your family has long forgotten your face since they never see you.  Your fortune becomes a huge pay cut, the result of a poorly run business.  Your liesure has been traded for living at your office.  You trade your 40 hour per week corporate job for an 80+ hour per week self-employment nightmare.  Your travel has become nothing more than a mind-numbing commute from your home to your office.  Your possessions are not exotic cars and vacation homes, but accounts payable, credit lines and inventory.   

How did you get yourself into this nightmare?  For most, the answer is in conducting the proper research, developing a solid marketing plan and testing for viability.  This simple process would have told many business owners that their business model was flawed and needed adjustment.  Unfortunately, they never really did any business planning.   By focusing on the prize and not the process, these starters never really got started…at least not properly.  The process is not complicated, but you do need to follow it.  If you don’t understand the process, get some coaching, find a mentor, or read a good book.  That reminds me, entrepreneurs can buy my new book Business Start-up 101 by visiting www.BusinessStartup101.com or Amazon.com.  If you want to chat, drop me a line.

Business Planning - What Not To Do: Part 4

Verify Viability.

The only thing worse than not doing any research is not verifying viability.  The tools available for entrepreneurs are many and can sometimes feel complex.  I meet many people developing their business plan and doing their market research without a clue of how to prepare a viability analysis.  I’ve got a very simple system called the Three Tools of Financial Viability^TM.  The tools are available to every business owner or prospective entrepreneur and are fairly simple to use.  The tools consist of an income statement projection, a cash flow report and a break-even analysis.  That’s it.  That’s really all you need to test for financial viability.

The income statement determines how much money you business will make and over what time period.  The cash flow report determines how much cash you’ll need to start and run the business according to your business model.  And the break-even analysis tells you how much business you’ll need to support the level of infrastructure you’re projecting.  Based on the level of business you can ask yourself it that actually makes sense?  In fact, you can use all three tools to determine if your model makes sense.

In the best case scenario, you’ll run the numbers through the Three Tools of Financial Viability^TM and determine if you like the results.  If not, tweak the business model so that you get a different outcome and run the numbers again.  Keep repeating the process until you like the results or determine that the model, at least in its present form, will not work.  If you like the outcome, you can start writing your business plan.

That’s really all there is to it.  Students who go through my business plan class almost always dread the discussion about income statements.  They think the process is way too complicated for non-accountants.  When I tell them that constructing an incomes statement is the easiest part of the whole class, they laugh, nervously.  Once we finish though, they all agree that they can do this too.

For more information about the business planning and start-up process, get my new book,Business Start-up 101, From Great Idea to Profit…Quick!  It’s coming out in September, but you can pre-order your copy now.

Business Planning - What Not To Do: Part 3

Shortcut the research.

Does this really need explanation?  Okay, so it does.  I’ve found that ‘things that go without saying’ should always be said.

You probably know someone who tried to start a business without doing any or adequate research.  You remember them telling you about this fabulous business idea that they came up with and after researching the market, they’ve decided that nobody else has ever had the idea.  The only problem is that you know of at least two other companies who do this same idea and are doing it very well.  What was this person thinking?  They clearly didn’t do any research because the vaguest of internet searches would have turned up their competition.

On the other side of the coin, we’re not trying to solve the remaining six Millennium Prize math problems.  We’re talking about answering a couple of basic market research questions.  

1. Who is the competition and what are they do well and not so well.

2. Who is the customer and be able to describe them in demographic terms

3. What do your customers like and dislike about the product or industry and what do they really want?

4. S.W.O.T. Analysis for your company and the market.

That much research might take you a couple of days or a couple of months, depending on how much time you have to devote to the project and how complicated your market.

For more information about the business planning and start-up process, get my new book, Business Start-up 101, From Great Idea to Profit…Quick!  It’s coming out in September, but you can pre-order your copy now.

Business Planning - What Not To Do: Part 2

Just dive in.

Before diving in head first into water that may only be a few feet deep, take a step back and make a plan.  I’ve developed a process for this business planning activity that I think works very well.  It will save you time and help you define the probability of profit quickly.  You can then tweak your model until you like the outcome or dump the whole idea if it turns out not to be viable.  The process is this:

Market Analysis

  - Competition

  - Customer

  - SWOT

Marketing Plan

Viability Testing

Once you finish with your viability testing iterations, you can move on to identifying and determining some of the more mechanical processes of starting a business such as entity type, location, identification of partners (banks, insurance agents, accountant, attorney and of course consultant).  Only then should you start writing the plan.  If you do all the research and planning, writing the plan will be a snap.  The only question will be how much detail you include.

For more information about the business planning and start-up process, get my new book,Business Start-up 101, From Great Idea to Profit…Quick!  It’s coming out in September, but you can pre-order your copy here .

Business Planning - What Not To Do: Part 1

Just start writing.

Many new entrepreneurs get started by writing a business plan.  At least they try to start their business by writing a business plan.  And while this is the advice you’ll get from many coaches and consultants, it’s probably not the right way to begin.  Many get stuck after the company description part and don’t know what to write next.  And there’s a good reason why they get stuck, they don’t know what to write.  If it sounds like I'm talking in circles, it's because I am.

Business planning doesn't start with writing a business plan, it ends with writing a business plan.  That's because a business plan is a summary of all the work, planning and research that an entrepreneur has conducted.  It’s not a novel.  You can’t make up the plot as you go.  You have to know the details, before you can sumarize.  After you finish all the research and analysis, confirmed viability and are happy with your business model, THEN you start writing down your plan.

Over the next several entries, I’m going to discuss some things not to do.  I have a specific process that I recommend for entreprenturs getting started on the road to business ownership.  I’ve outlined this plan in my new book, Business Start-up 101, From Great Idea to Profit…Quick! coming out in September.  Click here to pre-order your copy. 

Business Start-up 101

My new book, Business Start-up 101, From Great Idea to Profit...Quick! is due out September 13th.  You can pre-order your copy by September 3rd and receive an autographed copy.  It's a 'how to' guide for entrepreneurs.  You don't need an Ivy League MBA to start a business, you just need to know the rules.  Business Start-up 101 will teach you the rules and help you develop your idea and prepare for success.  It's available fromwwww.BusinessStartup101.com , www.BluePointStrategies.com.  After September 3rd it will also be available on Amazon both in print and Kindle format.

What Entrepreneurs Can Learn From The Boy Scout Slogan

As I mentioned in my previous post, I love the Boy Scouts.  I spent many years as both a boy participant and an adult leader. Scouting teaches boys important skills and manners that will serve them well as adults and as business leaders.  

The Boy Scout Slogan offers another great opportunity learning opportunity for entrepreneurs and business leaders.  Do a Good Turn Daily.  It seems simple enough.  According to the Scouting literature, that can mean something as simple as a small, thoughtful act like helping a child across a busy street, going to the store for an elderly neighbor or welcoming a new student to your school; or a really big turn like saving a life, helping out after a disaster or working on a conservation project.  It goes on to say that a good turn is more than simple good manners; it is a special act of kindness.

The slogan calls for boys to do a good turn every day.  Now if a boy were to have not only good manners, but also behave with special acts of kindness ever day, that would make for a pretty special boy.  Little old ladies and young children standing on street corners would be clammering for such boys and their demand would be high.  Everyone would want such a boy in their neighborhood.  One and all would lavish praise on such a boy.  He would be a hero among boys.

What if we replace ‘boy’ with ‘company’?  What would happen in the neighborhood, let’s call it a market, if the boy, let’s call him a company, were to act with not only good manners, but also with special acts of kindness, let’s call it superior customer focus, every day?  How would such a company be regarded in the market and by its customers?  It would be an anomoly in the industry.  In fact, such companies do exist, but they are so rare as to have special case studies written about them in business schools because of their unusual behavior.  Books would be written about such companies defining how they do what they do.  Articles would tout the awesomeness of their employees, systems and management.  

So why don’t we, as entrepreneurs, embrace this idea of ‘Do a Good Turn Daily?’  Do we get so hung up in the day-to-day activities of running our little businesses that we forget who our customers are and that this whole process is really about them, not us?  Do we just get tired or worse yet, just don’t care anymore?  Obviously, the answer is different for each of our organizations.  Maybe we should go back to our Mission Statements and Value Statements and see what it is that we’re supposed to be all about.

I think the Boy Scout Slogan reminds us that it’s not about fancy systems and better technology and improved products necessarily.  It’s about serving our customers in a way that makes them happy to do business with us.  It’s about providing value.  It’s about making your customer’s life better.  It’s about special acts of kindness, every day.  That’s not really so hard, is it?

8 Big Mistakes Small Businesses Make

Do you realize that there are mistakes you can make at various stages of your business’ growth that can be slowly killing it for months or even years if you don’t watch for them?  These mistakes do exist and they are not just reserved for the rookie companies. Many working businesses, including those you might think are “successful” because they’ve been around for 10+ years, are often still making them… and are possibly losing a lot of money and/or wasting a lot of time in the process. 

Although some of these mistakes seem aimed more at service type companies, they really do fit the bill for almost any type of industry.  I’ve done my best with the listings below to give examples to prove it.

1. Underestimating Project/Service Time - This is a big one and it pertains to service companies as well as companies that sell a product. This is a service company’s bread and butter.  If you don’t estimate your time to perform each and every service in your repertoire, you will get burned and there is little you can do about it but bite the bullet and learn from it.  The best way to estimate time is to do it once yourself or watch your best employee do the task and then throw in a little fudge factor on top of it.  For product companies, time becomes an issue with logistics so be aware!
   
2. Not Knowing YOUR Company Numbers - Notice I emphasized the word “your”. It’s a common mistake to use a competitor’s numbers as your pricing gauge without actually knowing why they use those numbers.  Think about the nightmare you will get yourself into if you take a competitor’s price, cut it by 10% and then start selling. What if the competition has a bad pricing structure and is barely making money or even losing money?  What if your costs are more than theirs?  You can use competitor prices as a starting point but you can’t base your whole strategy on it.
   
   Different industries have their own cost variables and you need to be aware of them for your project or product pricing.  What you pay for a product you are going to sell is not the only cost to have in your head when you are pricing products.  How much your labor and materials cost for a service is only a piece of an hourly rate.  Employees cost more than just salary and not every employee is part of your labor cost.  Every company has insurance in addition to overhead expenditures that need to be part of your price.  Oh, by the way, the big one that many people forget about in their price is the quality factor. What you include as “standard services” or “standard product features” as well as job site etiquette or in store service or warranties all need to go into your pricing.
3. Not Charging for All of Your Time & Costs - This seems like a ridiculuous statement to some but I bet most business owners will admit that they have given away a little too much of the farm at times.  Hey, there is nothing wrong with giving a little extra here and there to show you care. But either way, that’s not what I’m talking about here. What concerns me are those that put a lot of quality into their work or products or stores and do not cover the cost for it.  As an example, say you run a service company and your competitors don’t do a certain standard service that you do.  You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront.  Stores undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it. These things cost you money and when your competitors don’t do them it costs them less money.  Put out better service and then under price them, and your competition just has to wait a little bit for you to fall on your face so they can swoop back in.
   
   As a business owner, you need to believe that you are providing your clients worthwhile wares that deserve to be paid for.  If you get the chance to explain why your prices are higher, then take that opportunity and do it.  If they don’t like the fact that you include things that others charge extra for later or that you treat them better, then they are most likely completely price shoppers.  You don’t want them as regular customers anyway.
4. Not Getting Paid Fast Enough - That’s right, the old cash flow issue.  As long as you are actually making enough money to pay the bills, this problem can be solved, prevented or at least made to be not as bad as it could be.  Here’s the deal:  First off all, bill customers very promptly.  It is very common for a small business to not have the procedures or systems in place to get invoices generated and out the door in a timely fashion.  Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is very easy for the people responsible for getting this info to the billing people to be too busy to get it there or not have enough organization to give it to them the right way.
   
   The second part to slowing down or stopping a regular cash flow crunch is to make the quickest payment deals possible with customers and the slowest possible with vendors and employees.  If there is any way not to pay employees any more than twice a month, you better do it.  Contractors always have an issue with this. If you must pay weekly, then tell them before they are hired that they will be getting the first week held back, essentially buying you a week.
   
   Part three involves credit.  If your company can get a credit card, then get it. This allows for certain important things to be bought (that you can afford) that might come up during a cash flow crunch.  Better yet, especially if you have no choice but to deal with 45+ day customer payments, do your best to get a company line of credit.  This is a must if you plan on selling to the government or doing commercial service work.  These clients often have 60 to 90 day wait periods. 
5. Failure to Have Solid Systems and Procedures in Place - Too many procedures (known as “red tape”) is the reason why many people start their own business in the first place.  Unfortunately, having no procedures and systems in place at all is not an alternative.  Depending on the type of industry, business owners must come to a happy medium or chaos and the unknown will ensue. Some basic examples where procedures or systems are needed include billing, collections, payroll, human resources (interviewing, hiring, vacations, benefits, job responsibilities, etc.), manufacturing, operating equipment, maintaining equipment, inventory, sales calls/visits and logistics to name a few.
   
   Even a one person show needs to have some admin procedures in place.  This will make it easier to hire temps and subcontractors and control what they are doing for you.  Without at least a watered down version of a system or procedure to do everyday work, you will be to blame for causing many major headaches as your company grows.  I can’t emphasize how important this is for when you bring on new employees.  I’m sure you heard this before, but I am also a big proponent of having an employee handbook even for one employee.  It’s amazing the trouble people can cause business owners just because they allow you to pay them.
6. Spending Advertising Money Just to Say You Advertise - I would almost rather see my clients not advertise then to spend without regard to tracking the results.  There is no point in a marketing campaign if you do not put things in place that allow you to measure how well the plan is working.  The other wasteful part of marketing is not tracking their previously successful campaigns.  Why some people think that just because a $400 dollar a month ad worked once very well for one busy season, that it will automatically work every year after that is beyond me.
7. Spreading Yourself Too Thin - This is a classic mistake made by every entrepreneur. The key is to figure out when you are at that “wearing too many hats” point and start getting some help.  The solution here is to know your strengths and to be able see when you are not performing the duties that demand these skills.  If you are the best sales person on the company, you can’t get caught up in day-to-day operations.  If you do, sales will slip and eventually you won’t have any operations to worry about.  Think about this to help you figure out if you are spread too thin: Did you really go into business for yourself to work 80+ hours a week?
8. Not Getting Help Soon Enough - Set goals to know when to hire people to take over where you are light on knowledge. Not getting help or waiting too long can kill a company.  Most people who start a business do it because they are good at the technical end or the sales end.  If you know the best way to make a widget, then your strength is in production and that is where your time should be spent.  Hire an outside company or consultant to take care of the sales and marketing and then hire inside when you can afford someone full time.  Don’t be something to your company that you are not. It will only hold you back.
   
   The three big issues people like to tackle themselves but usually are least knowledgeable about are legal issues, accounting/bookkeeping issues and daily operations issues.  The odds are that these three things are your weakest link so if you don’t have a partner that has the background for these subjects, then be prepared to get help as soon as possible.  It’s preferable that you do this before you start a business.

Although looking for these problems at any time is a good idea, the end of a year or season is an excellent business interval to make sure you are not making these errors.  Take the time, or make the time, to fix these problems. If you don’t know how to reverse the problems, then get some help.  If you really don’t have enough time to either figure out if you have these issues or know they are there and can’t break away long enough to do it right, then get some help.

Systems Thinking

I’ve been a follower of the ultimate systems guy and small business guru, Michael E. Gerber, for many years.  In fact, I regularly teach the principles and encourage would-be entrepreneurs to read his most famous work, The E-Myth Revisited, Why Most Small Businesses Don’t Work And What To Do About It.  If you ever hope to ever enjoy the lifestyle and financial success that likely drove you into your venture in the first place, you’ll need to embrace this idea of systems thinking.  The idea goes something like this:  Just because you are good a doing some activity, doesn’t mean you can run a business that provides that activity.  For example, just because you are really good a making homemade pies and cakes, doesn’t mean you can run a bakery.  That’s the idea and story of The E-Myth Revisited.    If you don’t know Michael Gerber or have never read this book, I encourage you to do so.  In fact, it’s number one on my list of required reading for entrepreneurs.

  

Your goal as a starting or new business owner is to graduate from being a technician (someone who is good at doing a specific job or task, like an engineer or salesman or accountant) to being a manager (the one who manages the whole operation) to being an entrepreneur (one whose job it is to promote and position the business for growth and prosperity, but not the person who does the individual jobs or manages the people who do the jobs).   A technician can do a specific job or possesses a certain set of skills.  Your job as a business owner is to identify the best way to perform your job and then document that system of performance so that any employee with the basic skill set for the job could step in and also perform the job at an acceptable level.  If you ever want to graduate from being the worker, you’ll have to use your skills to create a system for doing your job that can be taught to others.  In fact, you should approach your whole business from the point of view that you will franchise the business eventually.  You likely will not actually franchise the business, but you should approach the management of your company with that perspective.  That way, you can create a company that will run just as well when you are standing there as when you are not.  This is really critical if you ever hope to be an owner and not an employee.  

  

Think about your business in relation to one of the most famous franchises in the world; McDonald’s.  Everything at McDonald’s is systemized.  From how to prepare the store for opening in the morning to how to close it down at night, everything is documented and systemized.  I was fortunate enough to work at McDonald’s while I was in high school and college.  I say fortunate, because not only did I have a job that provided needed funds to pay for my college education, but I also learned about business management from the experts in franchasing.  While you can’t factor out every behavioral issue of employees, you can create a business that makes excellent profits that’s based on a system that allows for incredibly high turnover of unskilled workers.

  

Hopefully, your business will not have 200 -300% turnover rates.  But if it does, your systems will allow you to deal with that in a way that still insures your business will operate in the same ways that it would if you were performing the jobs yourself. 

  

Much of this systems thinking approach doesn’t really take place until your business is up and running.  However, as you design and organize your business for the first time, think about how you want to organize your operations and what is the best and most efficient way to perform the individual tasks.  This is an excellent opportunity to get some of this work done.  As you progress, you can continue to collect data and ideas for organizing and systemizing your processes when the time is right.  

Starting & Developing Your Business

Blue Point Strategies Chris Gattis will lead a workshop on June 26, 2010 for the Leadership Empowerment Resource Group.  The workshop, located at the Kingdom Builders Conference Center at 2049 Max Luther Drive, Huntsville, Alabama will run from 10:00 AM until 2:00 PM.  The registration fee is only $20, but seating is limited.  Call (256) 326-0824 or (256) 270-8594 to register before all seats are filled.  The workshop, Starting & Developing Your Business will cover entrepreneurship, the mechanics of starting a business entity, writing a business plan and securing financing for your new business.  The workshop is suggested for any would-be business owner thinking of starting a business.