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All About Small Business
Updated: 1 hour 59 min ago

Business Regrets

Sat, 06/08/2024 - 10:51

Every successful small business leader has regrets.  During two recent focus groups of owners led by Small Business Digest, they were asked if they harbored any regrets from their early years as entrepreneurs.  This question opened a floodgate of responses.  With the passage of time, these feelings had moderated but all participants offered examples in the hope their identification of woes would help others.

Here are the top five regrets offered by these successful small business leaders.

  1. Not having an exit plan for themselves.  While some leaders had a plan for the company they hadn’t thought of ways they could profitably leave should that become a priority.  Many found themselves in a situation where by, if they left the company would suffer or worse, there were no provisions for their departure with viable financial compensation.
  2. Not spending enough time with the family during the company’s early years.  Often younger entrepreneurs have small children and spouses.  Growing a small company often requires 24/7 commitment from founders.  But this commitment is often at the expense of family (friendships, too).  Many successful leaders report estrangement from their children.  They also report second marriages and another set of children often occur.
  3. Not having partnership agreements or specific employee rewards program for early contributors.  No one sues if a company fails.  Many litigate if a company is successful.  Legal issues arise when companies are about to be sold; partners diverge in vision; or employees feel promises were not kept. Get as much as possible in writing but above all recognize early who contributed what to the company’s success.
  4. Not identifying financial obstacles early in the company’s history.  Assuming financial needs at the outset is important and having prepared for them is essential.  Equally important is having some way of raising emergency capital.  Every one of the focus group participants said they needed to overcome a financial emergency.  Several said their initial foray into business had ended in disaster because of unavailable funds.
  5. Not accepting help when offered.  Perhaps the greatest regret expressed was that of refusing help.  Proffered aid included financial, advisory, inventory, material resources, and operating space.  Many of the participants said they initially operated on the idea they could succeed by themselves.  They failed to recognize how outside help is sometimes critical to success.  Believing you do not need to bring others on board might leave you with 100 percent of nothing.

There were other regrets mentioned in the focus groups but these five stood out as the most far reaching.  Do you have any regrets?

Learn from others to minimize or eliminate your business regrets.

Location, Location

Thu, 05/09/2024 - 16:14

Today with the emphasis towards online information gathering, communications, and sales, small businesses leaders often neglect to fully understand the importance of physical location to the success of any business.   

While experts estimate one out of three new ventures focus on being online only, they along with many businesses with brick and mortar needs, view the physical location as an afterthought.  For reasons to be discussed below, location (formation and brick-and-mortar) should be ranked third after financial strength and product or service appeal in importance. 

First and often overlooked, it is important to consider location when a company is being formed.  Experts estimate most small businesses are formed within three miles of the founder’s home.  This factoid is not a surprising given a majority of ventures often begin within the founder’s home. 

INCORPORATION

At the basest level, where a company is incorporated or obtains its legal authority should be based on which states, like Nevada, have tax rates that are low or non-existent for smaller enterprises.  These states are also flexible as to physical location for the headquarters so that using a local mailbox center will often suffice.   

Finding the right state for incorporation can save small companies thousands of dollars in its first years.  There are also professional incorporation providers available to ease the process.  Whether the company is a C, sub-chapter S, partnership (LLP), or LLC should be the recommendation of your accountant.  Moreover, it is important for new business people to put themselves behind some legal entity to protect their assets. 

Second, once the legal incorporation is in progress, the next step is deciding if a brick-and-mortar location is necessary.  Leasing an office, shared space, using your kitchen table, converting your garage, are all available alternatives.  The key to these choices is not over committing to more than the company needs in its initial efforts.  Above all, seek to conserve as many liquid funds as possible to stretch out your runway to profitability. 

For products in need of a retail operation, choosing a location is critical to success.  Some of the factors to consider are: 

Type of business location (retail, mobile, commercial, industrial, etc.)

Consider your brand

Foot and car traffic offers ability to generate sales. 
What is the mix of nearby stores and are they complementary 
Rent amount; find out if it can it be kept smaller in the beginning 
Structure lease requirements to give the company grow or contract
Find locations that reduce the cost of build out 
Explore all equipment costs, lease alternatives 
Examine the local labor pool characteristics
Easy to connect with vendors and suppliers

Insure space availability for delivery services 
Determine adequate parking availability for customers 
Evaluate crime statistics involving nearby retail outlets 

Checkout common charges, escalations, extraordinary expenses associated with the location

A recent study by Small Business Digest determined many companies entering their fifth year begin to consider purchasing their first physical property.  For professional services firms, this point occurs about three years later.  For retail stores and distributive companies, these considerations usually revolve around needing extra space.  

Real estate experts are split on the advisability given the high interest rates but the availability of existing buildings often well-suited to the company’s needs at attractive prices make for compelling arguments to purchase.  A rule-of-thumb one real estate expert suggests is to double current square footage needed in choosing new location to allow for expansion in later years. 

In today’s market, with the advent of work-at-home hybrid efforts, office planners suggest waiting until 2026 before purchasing office space.  Also, they point out there is a glut of office space available today that will be augmented by new buildings coming online.  Many will combine in work and living developments which may offer attractive work-life opportunities. 

LOCATION, LOCATION

This has been a necessarily brief overview to a very important small business consideration, location.  There is much more to discussion necessary but small business leaders should keep thinking about location in all of their planning. 

Delivering Bad News

Mon, 04/01/2024 - 15:44

According to surveys conducted over recent years, giving bad news to employees, customers, and vendors is rated one of the most challenging tasks small leaders perform during the work week.

These same surveys indicate that small business leaders believe the task has become more difficult due to the recipients’ changing attitudes.

When it comes to employee reception to negative statements on the part of managers, some small business leaders report extremely distressful reactions bordering on physical alterations. While stopping short of violent personal attacks, employees have been known to destroy property, equipment, or paperwork in reaction to conversations that impart discharge notices, position changes, promotions or demotions, or compensation reductions.

When dealing with clients, small business leaders report rising intolerance on the recipient’s part of even one misstep. Where, in the past, loyalty to the provider would enable the negative information in the context of overall performance, in today’s world, a single step is enough to cause total separation.

When giving bad news to vendors, the reaction can range from cutting off services and deliveries early, bad-mouthing in the industry to the threat of legal action.  While the impact of negative information can be softened, it can’t be erased.

Here are some ways of lessening the impact of negative communication on the company’s internal and external communications.

For employees, the most critical element of imparting negative information is for the company to do the telling. Rumor mills can outrun corporate decision-making and can never communicate all of the details.

What’s more, according to communication experts, rumors feature the worst possible scenario first. Make sure information about the company’s decisions, such as whether to fire, demote, cut salary, or retrain employees, is the first heard from the company.

The delay means the company grapevine will work to undermine whatever positives are possible.

No matter how dire or menial the negative news is, ensure there is some positive associated with its implementation. But don’t emphasize the company’s benefit; rather, emphasize whatever positive will accrue to the individual affected and to his or her closest workmates.

Whatever news is being imparted, repeat it at least twice in the initial meeting. Tests have shown that in workplace situations, employees do not hear all of the relevant information when receiving even trivial bad news. It is essential to repeat the news at least twice in the initial discussion; put it in writing and then repeat it verbally one or two days later. At all times, solicit feedback from the employee, who is in no mood to provide any, let alone positive feedback. Accept the fact that accurate feedback will only come in the future.

Communicating bad news to customers requires additional finesse. The customer relies on price, quality, and consistency. When bad things happen, such as a price hike, product scarcity, or missed delivery, the experience affects the buyer-seller relationship far more than positive events. There is an adage: One damn is equal to 10,000 bravos.

The best way to lessen the impact of one bad event is to sandwich the imparting of this news between two positives for the customers. For years, this was the hallmark of IBM sales and servicing. For example: “Your dry cleaning will be free next month. We are sorry, but we burned a hole in your shirt. We have repaired the hole, and it is no longer visible.”

As with employees, it is best to convey the negative information immediately rather than wait until the client asks. The recent run on the nation’s banks was triggered in part by the banks under review’s failure to adequately inform depositors of the difficulties they faced. Had the banks been readily forthcoming, some experts believe, some of these failures could have been avoided.

While vendor relations are usually contractual, providing bad news, such as cutting back on products/services or ending the relationship, needs to be done in accordance with the contract and handled with finesse. Explain why the business is going in another direction, why the quality has slipped, and why we have tried to work with you without success.Above all, remember what the purveyor of bad news wants: Acceptance.

Acceptance is often the most challenging response to obtain.

Nevertheless, bad news cannot wait; share it openly and honestly and be prepared to answer questions.

Funding To Grow

Fri, 03/08/2024 - 14:19

A recent national survey found that 67% of U.S. small-business owners plan to pursue funding for their business in the next 12-months. This despite the obstacles high interest rates and stricter credit standards making it more difficult for all but the most profitable companies to obtain financing.

With the stock market betting the Federal Reserve will cut its interest rate later this year, should small business leaders wait to expand company borrowings? The answer is not simple.

Business loan by Nick Youngson CC BY-SA 3.0 Pix4free

First, small businesses need new loans from reputable lenders to finance products and services as the nation’s economy begins to expand. Delays in finding finance mean the small business has less time to prepare for the expanding sales situation. Depending on when it is recognized, a booming economy requires small companies to find the funds to grow with it.

Three years ago, when the interest rates charged by the Federal Reserve began to climb, many innovative business leaders locked in credit lines at rates, according to banking groups, which insulated them from the highest interest tariffs. Most of these agreements ran for two or three years and are due for review this year. According to these same banking advisors, the rates for renewal for even the highest-quality clients are less attractive. Many companies need more credit line extensions at almost twice the average percentage.

At the same time, banks and other financial institutions spend twice the usual time vetting new customers for corporate loans. Despite the desire for new customers expressed by banks, they are also rebuffing more of these new applicants than at any time in their history. Senior bank officials expect these two dynamics to remain the same later this year and into 2025.

Also, specific industry sectors or industrialists are finding it harder to obtain construction or other speculative loans routinely approved through short-term loans.

Dupaco Community Credit Union

The small business loan sectors also have a seasonality that works against waiting too long for this expected drop. The first and third quarters usually see peak demand for new loans, which likewise come due during these poor times. While this first quarter is not entirely over, early indications are that loan demand and extension requests are up.

Here are four things you can do to ensure that monies are there for you when needed.

               Strengthen your relationship with your current bank and reach out to other institutions.

                Add monies to your deposit history regularly.

                Have your accountant build pro forma balance and income statements to share with your banker.

                Build up a cash reserve in your bank and talk often and candidly with them about your operations.

In summary, act now so your business will have the funds to expand.