Holiday Rush

The holidays are approaching and many businesses are gearing up for their busiest time of the year. For some retailers, this is a make or break season. Obviously, I hope most make it!

With my previous bagel stores in NJ and Pennsylvania, the day before Thanksgiving and Christmas Eve were our two biggest sales days of the year. It is something that I never quite understood, as we never really set out to be busy on those days. During my tenure as a part owner, we didn't really develop any holiday themed specials, with the exception of making a red bagel dough and a green bagel dough and creating red/green marbled bagels for sale during the Christmas season.

In hindsight, I was guilty of not properly planning for the holiday season and I let some opportunities for profit maximization slip away. It would have been easy to develop some better holiday themed specials to garner more sales and profits out of the 500 or so customers that would come into our store each of those days. Sales were always good on those days, but could they have been better?

Why did I squander this opportunity? It is truly a lame excuse, but it stems from the first day before Thanksgiving that I experienced. We kept running out of bagels. I had my oven filled to capacity from 4:00 AM until 10:00 AM and I still kept running out of bagels. Some customers wouldn't wait and they would leave the store early. So the following years, my only focus was making sure that I didn't run out of bagels again. I was focusing too much on my operations and forgetting my responsibilities as a business owner to maximize our marketing efforts and set financial benchmarks for success.

It is this tunnel vision of focusing on one area of business development that often keeps small business owners from maximizing success during the holidays. Business owners need to be holistic in their management if they really want to have a successful holiday season. Keep a balance between developing marketing plans to get more customers, the operational plans to maximize your productivity during this season and measure the financial performance to ensure you are achieving financial success.

My hope is that more small business will reap the benefits of the holiday rush this year. It can be a hectic period for retailers, but it can also be very profitable. Make the best of it and have a joyful season!

Back to the Future

We plan to present a series of business training seminars in late October and early November in partnership with the Plattsburgh-North Country Chamber of Commerce and TD Bank. I was given the task to come up with four business development topics, so we had a discussion at a recent staff meeting.

We narrowed down our four topics down to:

* Writing an Effective Business Plan
* Financial Finesse
* Shout it Out Marketing
* Increasing Your Bottom Line

In our discussion, we talked about the need to focus on the basics of operating a sound business. There are certain fundamentals that can be applied to any business, at any point in time. We were all in agreement that all business owners should be able to benefit from attending this series, whether they are just starting out or have been in business for years. We believe these topics can be applied to any business, at an point in their life cycle.

I thought that coming up with a title was going to be a challenge. I explained that we want to be all inclusive, yet we want to show that this isn't just a "business basics" class. This series is geared towards those business owners who want to strive to be the best in their respective industries. Our goal is to have our attendees be the business leaders of tomorrow. Those who seize the opportunities of today and excel in making their businesses a little better each day.

One of our staff members, Andy Allison, suggested "Back to the Future." It is a very catchy title made popular by Universal Pictures movie series starring Michael J. Fox, Lea Thompson and Christopher Lloyd. Yet to me, this title succinctly captures what our series is really all about.

Sometimes in business we need to go back to the drawing board and look at what our goals are for the future. Time and time again I work with business owners who get so wrapped up dealing with the operational challenges of today that they lose focus of what they set out to achieve in their original business plans.

Business planning is not a one time exercise; it is a process that should continue into the future. If things are going as planned, it does no benefit to complain about what is wrong. Find new opportunities and set a course for your business to thrive. Establish specific goals and revisit your planning process on a regular basis to see if you are meeting the benchmarks you have set for your business.

Yet no planning process would be effective without looking at past trends. Yes, there are new opportunities for tomorrow, but past behavior tends to be a good predictor of future operations. There is a popular saying that the definition of insanity is "doing the same thing and expecting different results." Part of the planning process is to look at past trends, both in business financial performance and consumer spending habits to recognize the best opportunities to develop a more profitable future.

There also needs to be a self assessment that certain things in a business are not working as planned. Sometime your operations, pricing strategies and marketing need to change. Maybe you made an investment in inventory or plant equipment that is not generating the return on investment that was expected.

Of course, developing a more profitable future is not a passive exercise. You have to actively let your customers know about your business and it is within your realm of responsibility to develop a profitable business model for your operations. If something is not working as planned, create a new plan and actively work towards making things better.

Whether or not you plan to attend our training series, consider taking your business "Back to the Future." There are always opportunities to thrive in any economy. It just takes a good plan that recognizes the story of your past and focused vision for what you expect to see in the future.

Do No Harm

I was at a business hearing yesterday sponsored by the North Country-Plattsburgh Chamber of Commerce and Unshackle Upstate. At this hearing, business owners were able to share their perspectives on challenges their businesses have been facing over the past year. Listening were State Senator Betty Little, Assemblywoman Janet Duprey and Meg Wood, representing Assemblywoman Teresa Sayward.

It was interesting that none of the businesses complained about "the economy" or the challenges of dealing with a recession. None of them asked their State representatives for bailouts to help them through these troubling times. Instead, every speaker talked about the new fees, taxes and regulations that the State imposed over the past year that are crippling their businesses.

Included in the list is:

- Requirement to renew the Certificate of Authority to collect sales tax (that for the first time, includes a fee)
- Increase in the LLC filing fees for companies that have achieved a certain gross sales figure
- Increase in tobacco license fees
- Increase in liquor license fees
- Increase in motor vehicle fees

One of the more compelling stories related to the changing of the Empire Zone tax credits. A few businesses that made huge capital investments into their business under an Empire Zone program that provided tax credits now have to reapply for those tax credits. One company present completed the application six months ago and they still have not received their credit refunds. These amount to tens of thousands dollars of operating capital owed to them. If you are just one month late in paying NY State Sales taxes, you will be assessed penalties and interest that can exceed 20% of the tax owed, yet the State can withhold monies owed to a small business for six months without any penalties and interest?

Most of the States operating revenue comes from the income and sales taxes generated by private enterprise. Small businesses owned and operated by NY State residents provide even more of an economic impact, as they cycle more of their profits into the State economy. Not only are these fees and regulations creating a burden on businesses, they are also providing an inequitable burden on small businesses.

According to an SBA study in 2005, the average regulatory cost per employee of a firm of less than 20 employees is $7,647. The average regulatory cost for a firm of greater than 20 employees is $5,411. No doubt the amount of time small business owners have in completing new Certificates of Authority, Empire Zone re-certifications and the costs of new fees is going to a much more significant impact on small businesses than the larger businesses.

For example, the license to sell tobacco was increased from $100 to $1,000 this year for small retailers generating revenues under $1,000,000 in annual revenues (note, this is combined revenues, not just tobacco sales). Those businesses that do up to $10,000,000 in gross revenues pay $2,500. Let's do a little math.

I have a convenience store that does $500,000 in gross sales. I sell about $50,000 of cigarettes per year. My gross profit on cigarettes is about 15%, so I clear about $7,500. My cost of licensing is 13% of my gross profit.

A few blocks away is a supermarket(which happens to be owned by a company in Maine). They do $5,000,000 in gross revenues and sell $500,000 in cigarettes. They clear $75,000 on cigarette sales. Their license fees are 3% of their gross profit.

I decide it is not worth my while to sell cigarettes anymore for $1,000/year. In a perfect world, we would assume all my cigarette customers would kick this habit. The reality is that most are just going to the supermarket to buy cigarettes and that profit is going to leak to that larger, out-of-state competitor. The significant amount of that $7,500 that would have cycled into the NY State economy with my spending most of my income in NY will now go to Maine.

Most of these fee increases will most likely have an economic impact of unintended consequences to the State, but that is often the case when government increases fees and taxes. There are only so many slices of pie in a particular pan, if you keep going after a bigger slice, eventually there will be no pie left. The fact that quite a few of our pie pans are smaller in these difficult economic times compounds the problem.

Quite a few of the speakers at the hearing noted that "we are preaching to the choir," as all of the government officials were opposed to the budget that proposed all these fee increases. Needless to say, we have to get our choir to sing louder.

This is not an endorsement or critique of any particular government official. When it comes to developing a State budget that makes sense, it should not be a party line issue. We need all government officials to think of the consequences of their actions. The livelihood of some small businesses are at stake here and that is an issue that every legislature should take seriously. Certainly this small business counselor takes these issues seriously, as I am often working with the business owner that is deciding whether this new fee or paperwork requirements are the proverbial straws that will break the camel's back. There are some businesses that are struggling to survive and these fees and to many, the State isn't putting straws, but rather shoveling lead weights on their backs.

In his introduction, Garry Douglas, Executive Director of the Plattsburgh-North Country Chamber of Commerce talked about the core principle of the Hippocratic Oath, which is "Do no harm." He pointed out that if our government officials were doctors and the business owners were patients, "boy, would there be a malpractice suit."

At some point, we need our leaders to develop a proactive strategy to make it easier for more small businesses to succeed in New York State. There are ways to do no harm and facilitate a more business friendly environment; the choir just has to sing a little louder and it would help if we could get more of our government officials to join us in singing the same tune when it comes to the principles that foster business development.

Health Care Paradigm

The buzz in the world of politics is health care reform. Different proposals have been shared, proposed legislation has been presented and “town hall” meetings have shown we can’t agree on a solution. Not only can we not find a form of compromise, but we also can’t disagree with some semblance of civility.

The emotions on this issue are so powerful and our nation is so polarized when it comes to finding a solution to this health care mess. Unfortunately, no solution will come to pass until there is some common ground found among our lawmakers. Yet instead of working together to find a solution, our lawmakers are drawing lines in the sand and using rhetoric to attack the flaws of others, completely ignoring the flaws with their own proposals.

I’ve used this Albert Einstein quote before and I will keep using it: “The problems we face today cannot be solved by the minds that created them.” Aside from the dysfunctional working relationship of our lawmakers, the major problem with our current system is that health care does not lend itself to insurance. Yet no one is addressing this issue. Our nation has created a for-profit, behemoth of a health insurance industry and all of the proposals currently on the table refuse to recognize that this needs to change.

Health care is something that every individual needs in some form or another. Of course, some need health care more than others, but the basic fact is that if we want to live, we need to care for our health.

Insurance is an industry that is based on managing risk. You get insurance to protect you from an unlikely event. The way the industry stays profitable is by assessing premiums based on the amount of claims and the cost of the payout. Premiums are established by analyzing that, and of course, including some margin for administration and profits. Obviously, if too many claims are made, the cost of insurance goes up. Sometimes the cost goes up to a level where there is really no value in purchasing a policy. At this point, consumers will usually see no benefit in that insurance and just come up with a better way to manage their risk.

Think of it this way. We need to eat every day. Should we buy food insurance to ensure that there is food on the table tomorrow? Imagine what that would do to the costs of groceries if most of us decided that we need to purchase insurance to have food on the table and then filed claims to purchase our groceries every week. Then compound that by the fact that some people in this pool of grocery shoppers need to eat significantly more than others or have special diets that require very exotic and expensive foods. Before long, we are paying significantly more for our groceries than what they are worth, because we are supporting both a for-profit insurance industry and a group of people who spend more on food than we do. This is pretty much what has happened to the health care industry.

Not only are most of us paying insurance premiums on something that most of use on a regular basis, we are also faced with the dilemma that some health care users are going to have expensive health care needs, some of which for conditions that will require some level of ongoing care. These needs for health care services tend to be exponentially higher than what an average user would spend for health care. Yet these costs need to be spread in the pool of users for health insurance companies to remain profitable.

According to the 2009 Milliman Medical Index, the average family of four spends over $16,000 for direct health care services. Yet the problem with averages is that a few exponential highs can really skew an average cost. If you think about what a typical family needs in a given year, $16,000 is a pretty high figure. What would it cost for 4 checkups and maybe four typical childhood incidents in year, such as a sprained ankle or sore throat that requires a doctor visit and some prescription medication?

It is hard to quantify what is an average health care cost for a healthy family, but it would obviously not be near $16,000/year. According the Henry J. Kaiser Foundation publication, Trends in Health Care Spending:

While discussions about the costs of health care often focus on the average amount spent per person, spending on health services is actually quite skewed. About ten percent of people account for 63% of spending on health services; 21% of health spending is for only 1% of the population.

Each person who buys healthcare is paying for not only their care, but also the care of others. Using my food example, why should I pay for grocery insurance so others can have truffles and Dom Perignon when I am only eating Cheerios and milk? Well, when it comes to health care, those who get the truffles and Dom Perignon often aren’t choosing such an expensive service. I dare say that most would rather not need such levels of treatment. Should I begrudge paying for someone who needs dialysis, an organ transplant or acute cancer treatments for a chance to survive?

We all need health care; so much so, that if we have a health care need, we will seek those services without much regard to costs. Yet the health care industry consists of businesses that have competing needs. They need profit, and to maintain profitability, they need to control their expenses. This creates a dichotomy where the insured wants health care at all costs and your insurer wants to limit payment of claims at all costs. This does not lend itself to a positive consumer/service provider relationship.

In this health care debate, we are talking about all the costs, but are we really addressing the core issue? Yes, finances need to be considered in any debate that discusses the use of public funds, but how do you quantify the value of pain relief, comfort or survival? At what point do we say that a life is not worth the cost?

Unfortunately this brings us to a huge philosophical question. Should health care be an individual responsibility or societal responsibility? It's a tough question that goes beyond black and white and their are infinite shades of gray. "Socialism" is a dirty word being thrown around in this debate, but we use our taxes for national defense, why not for national health? I am not yet sold on the so called "public option," but at the same point, I find the "socialism" rhetoric to be very counterproductive towards us coming to some form of improvement on health care.

No doubt, coming up with a solution that makes sense is going to be tough. I personally do not mind paying into a pool to ensure those who are in need have access to health care, but I obviously have limits into what I can pay. I will add that I have a serious problem being mandated to pay into an industry that gains profit by avoiding the provision of services that may be in the best interests of someone’s health.

The challenges we face with health care are significant. Somehow we have to change our level of thinking to solve this problem we created. Who will take the first step?

In Memory

As you read the news today, there is no escaping the significance of this day. Like many monumental days in history, we tend to reflect and remember where we were on that particular day of infamy.

I was living in Wasilla, Alaska at the time and it was one of those days when I felt being that far away from my family and friends in NJ and Pennsylvania was particularly difficult. I was also scheduled to have my very first surgery in two days and the thought of going under general anesthesia, something that was creating huge anxiety for me the days leading up to September 11th, now seemed to be an insignificant concern.

I remember watching the television over the next few days and hearing the individual stories of some of the beautiful people whose lives prematurely ended on that day. I couldn't help but think of the pain and grief the families of the those who lost their lives. I couldn't help but to feel guilty for worrying about something so mundane on a day when others had to deal with such a major tragedy.

Over the next few days I received the phone calls from family and friends and learned how some people I had known were included among those who passed on that day. Too many people perished and we do live in a small world; it is hard to think of anyone who was not touched in some manner by this tragedy.

Like many Americans, I still feel anger that a few uncaring individuals were willing to senselessly murder so many good souls on this day. I still cringe how people throw out the term “nine eleven” as a buzz word or remember this as a day of terrorism. It was a tragic day, but there was no terror, because I will never cower to a misguided ideology that justifies senseless murder. I didn't on September 11, 2001 and I still feel no terror today. I hope most other Americans share that sentiment.

Still, today is a significant day because we should remember the beautiful people who passed away on September 11, 2001. There will be many opportunities for remembrance and below is a link to one special location that I am aware of:

Garden of Reflection

I write this blog post in memory of Vic Saracini. He was a person who I did not know very well, but Vic Saracini would visit my bagel store on occasion and share some kind conversation with us.

He was a man who I know deeply cherished his family. He happened to share a story with me about the feeling of returning to his daughters after a trip. The smile on his face as he talked about his family told me more than the words he said.

We all have different memories and emotions about this day. I only hope you take the time in your thoughts to think of the wonderful people like Vic Saracini. They will be dearly missed.

What If Government Stopped and Nobody Cared

In a previous post, I quoted P.J. O'Rourke, who once wrote, “The mystery of government is not how Washington works but how to make it stop.”

On the state level, we recently found out just how to do that here in New York. For those not familiar with NY politics, there is what is considered the holy trinity of power brokers in state government; the Governor, the Senate majority leader and the Assembly majority leader. A few weeks ago, that included Governor David Paterson, Assembly Majority Leader Sheldon Silver and Senate majority Leader Malcolm Smith.

That was until last week, when two Democratic Senators switched their allegiance to form a coalition with the Republicans to oust Malcolm Smith as Senate Majority Leader. Since this little coup has take place, the remaining Democrats refuse to work with the new leadership. As if this didn’t sound silly enough already, the secretary of the Senate actually refused to turn over the keys to the Senate chamber to the new Republican leaders.

So since June 9th, the legislative branch of NY State Government has ceased operations. The effects of this government stoppage have been monumentally insignificant. Life has continued to go on in the Empire State. It is amazing how we have managed to survive with this huge void in leadership in State government.

To give you a sampling of what New Yorkers are missing, I randomly pulled three pending bills proposed recently in the State Senate. I started with Senate Bill S05700, proposed by Senator Klein, which prohibits issuing a credit card to anyone under the age of 21 unless that person has had parental consent and has completed a course or instruction in financial responsibility and liability. I wish I could propose a bill requiring a course of instruction in financial responsibility and liability for our elected officials.

Then there is S05701, proposed by Senator Schneiderman, that “requires licensure for instructors in religion, dancing, music, painting, drawing, sculpture, poetry, dramatic art, languages, reading comprehension, mathematics, recreation and athletics.” Luckily, my past work as a disc jockey was in NJ, not NY, or I may have been arrested for instructing the guests at the Weinstein Bar Mitzvah how to do the Electric Slide without proper credentials.

Next up is S05702, proposed by Senator Johnson, which “authorizes the metropolitan transportation authority to create a regional bus authority.” After all, we can just never have enough authority.

I will stop there. While this was just a small sampling, in my more in depth search, I was hard pressed to find any bills that appeared to provide any significant action.

My belief is that in regards to small business, the stoppage of the NY State Senate is one of the best things that could have happened. Aside from giving us a break from some pretty silly proposed legislation, the recent stoppage of government is preventing our lawmakers from further raising taxes, imposing new fees or creating a greater regulatory burden. While lawmakers don't like to admit it, New York ranks 49th out of 50 states, topping only New Jersey in the taxes and fee burdens placed on businesses. Here is a link to that study by the Tax Foundation: Tax Foundation

In a previous magazine article, I quoted Governor Mitch Daniels of Indiana, who once said, "It's essential to remember that government does not create jobs or wealth. At its best, it creates the conditions in which men and women of imagination and enterprise create wealth for each other. At its worst, it drives away such people and the jobs they create."

Unfortunately, since the Legislative session started last January, there were no indications that the New York government was doing anything to create better conditions for entrepreneurs in this State. In fact, in the first few months of session, the Legislature was seriously considering raising a number of taxes and fees. I was at a meeting last week and one business leader, whom I hold in high regard, said, "At least now that the State Senate is completely dysfunctional, they aren't doing any more damage."

It is hard to tell whether it will be days, weeks or months until the NY Senate fixes this leadership issue and gets back into session. Inevitably, they will return, but will business owners really care?

Over Stimulated

It has been too long since my last post and I apologize for my absence. I’ve been real busy at work and much of my time hasn’t been as productive as I would like it to be. A major reason is because of the American Recovery and Reinvestment Act passed by Congress last February, which is often referred to as the “Stimulus Bill.”

My problem is not with the American Recovery and Reinvestment Act. The President of the United States and the members of Congress should be given kudos for their efforts to take an active role in trying to get our economy on the right course. While no legislation is perfect, I am not going to waste one ounce of energy noting where this bill falls short of meeting the needs of small businesses. There are still plenty of positive programs that are coming out of this piece of legislation; some have already been implemented and some programs are still under development.

My challenge has been the volume of phone calls that have been coming to my office from both existing and aspiring small business owners who want to know what is in the stimulus package for them. More specifically, I have been getting a number of requests for grants that may be available to businesses from the “stimulus money.” Frankly, I am over stimulated with these requests!

I’ve actually taken the time to read the portion of the American Recovery and Reinvestment Act that relates to the Small Business Administration (it is just one section of a very large piece of legislation). No where in that legislation does it say that grants are being made available directly to for profit businesses. It has been a long standing policy of the US Small Business Administration not to offer grants to for profit enterprises. See this link: http://www.sba.gov/services/financialassistance/grants/index.html

Unfortunately for me, this gets lost on many existing and prospective small business owners. They still call up our office seeking their “stimulus money.” I then explain the programs of which I have been informed. When they find out that there is no free money available, some just hang up, while others give me an explanation why they are more deserving of government money than those “big investment banks that were bailed out.” While I may not disagree with them, I didn't write this legislation. Still, I try to be tactful in my responses and I can honestly say that the same courtesy has not been extended to me.

I understand that many small businesses are facing challenges in this economy. Yet I have said this before and I will say it again; no matter what the state of the economy may be, there will always be challenges for small businesses. The responsibility of dealing with those challenges falls squarely on the shoulders of the small business owner who chose to enter the world of self employment. If a business owner is not prepared to accept accountability for the risks of owning a small business, then they should not enter the field of self employment.

The rationale behind the American Recovery and Reinvestment Act is to spur the economy. Business owners who wish to be candidates for some of the programs available need to put together a strong business plan showing likelihood that they can contribute to economic recovery. This simply entails showing a profitable business model. Yet most of the inquiries I am getting are from people who have yet to think through the business planning process. When I tell people that a business plan showing profitability is going to be a requirement to funding, I am often told that “I just don’t have time to do that.”

Many people forget that most of the troubles with our economy stemmed from lenders who did not do proper diligence in ensuring their customers could service their loans. Part of that is not assessing whether clients had contingency plans to pay back their debts, which is a component of any good business plan.

All of the government programs still require working with lenders and whether they received TARP (bailout) money or not, lenders are not going to approve loans without responsible underwriting practices. In other words, banks cannot afford to make more bad loans. So most lenders are paying closer attention to contingencies, or second form of repayment, should the business model not satisfy the debt paymnets. That is where our economy is faced with a slight dilemma. Banks need to make more credit available if our economy is to grow, but banks can't afford to take too much risk.

There are provisions in the American Recovery and Reinvestment Act that will help loosen these credit markets and allow for more investment in small businesses. Still, there is a fine line between loosening credit and irresponsible lending. That is why any loan application that utilizes government resources needs to include a well thought out business plan making a strong case that the business is likely to generate profit, no matter what the state of the economy may be. Like it or not, our government can't take too much risk. The onus is still on the business owner to assume the lion share of risk.

As more small business owners use their creativity to find ways to be more profitable despite the challenges in the marketplace, we will quickly see a recovery. These successes will create a ripple effect on our economy. Spending will increase, more jobs will be created and our economy will become more vibrant.

There are opportunities for those who wish to be a part of the solution to the current economic challenges. All it takes is a good plan and an unending dedication towards profitability. Now is not the time for small business owners to be looking for the government for solutions, but rather to show the government that they can succeed despite any challenges. Perhaps it would help if more people thought about the American Recovery and Reinvestment Act from the perspective of what they will provide in return for the government's assistance. I think of the inspiring words that John F. Kennedy spoke at his inauguration, “And so, my fellow Americans, ask not what your country can do for you; ask what you can do for your country.”

Tax Payer Soliloquy

Yesterday was tax day. I belong to a Rotary Club here in Plattsburgh, and one of my fellow Rotarians (who happens to be a prosecutor) made this joke during the meeting: “Remember that tax evasion is a crime; tax avoidance is a duty.”

While that statement was said in jest, it brings to point a reality of civic responsibility. We obviously need tax dollars if we are going to provide governmental services, but it is hard to sustain services if everyone is trying to avoid paying taxes. Taxpayer avoidance is not something new. The philosopher Plato wrote, “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.” I concur with Plato that there is a certain civic duty in paying taxes; but I also agree with Arthur Godfrey, who once said, “I'm proud to pay taxes in the United States; the only thing is I could be just as proud for half the money.”

Part of my job as a business counselor is to help my clients get financing for their businesses. A key component of their loan application is a recent history of tax returns. The problem is that many of my clients have taken on the position that tax avoidance is their primary duty, so their businesses show little or no income. That may be well and good when it comes to tax time, but it certainly limits the prospects of getting financing based on the strength of the business.

To defend my banker friends, I need to add that if you really think about an enterprise, the tell tale sign of success is profit. So why should a bank lend money to a business that has not shown the fiscal ability to generate profit from their efforts? Yet I have had numerous bankers tell me about their loan applicants who wink at them and say, “Our tax returns don’t provide a true portrayal of our financial situation.” Let me add that making such a statement will not contribute to the chances of getting a favorable lending decision.

It’s a point to ponder. Yes, it is good to show profit to position a business for growth. Yet at what point is there so much being taken in taxes that business owners doesn’t see enough reward for their risk and hard work?

I am not taking a position either for or against tax avoidance. I was not part of any of the "Tea Parties" yesterday. Yet the discussion of taxes, civic responsibility and economic development should be revisited by our lawmakers with an understanding of what it takes to start and run a business.

With apologies to William Shakespeare, I offer this “Taxpayer Soliloquy”:

To pay or not to pay: that is the question.
Whether 'tis nobler in business to suffer
The slings and arrows of outrageous tax burden,
Or to take arms against a sea of taxing agencies,
And by opposing not pay them? To hide: to deduct;
No more; and by deducting to say we end
The heart-ache and the overly taxed income
That earnings, 'tis financial summation
Devoutly to be kept! To hide, to deduct;
To hide: perchance to go too far: ay, there's the rub;
For in not paying taxes what consequences may come
When we have overcooked the books and get caught,
Must give us pause: there's the IRS
That makes calamity of our accounting;
For who would bear the whips and scorns of their audit?
The tax agency is wrong, our accounting is reasonable,
The complex changes to tax code, the laws confusing,
The insolence of tax collectors and the interest and penalties!
That patient merit in trying to understand the rules,
When the business might have to pay taxes
Even without making money? Who would be so foolish,
To grunt and sweat running a business,
To give all the earnings to the IRS,
The unforgiving agency from whose wrath
No business can survive, puzzles the will
And makes us rather bear paying tax bills we have
Rather than pay the vendors, at least we won't go to jail if they are unpaid?
Thus conscience does make cowards of us all;
And thus to run a successful business
Is sick with the thought of paying all earnings to the government,
And enterprises of great growth potential,
With regard to taxation and regulation, see no benefits for their risks and toils,
So lose the opportunity for economic development.


I will conclude this post with a little humor from Will Rogers:
"Be thankful we're not getting all the government we're paying for."

If Opportunity Doesn't Knock, Build a Door!

A famous comedian, Milton Berle, once said, “If opportunity doesn’t knock, build a door.” Maybe this was said in jest, but there is a deep philosophical meaning to this statement that I think can be applied to today’s business environment. We can't just sit here waiting for things to get better. We have to make things get better through our actions.

There is no doubt that the markets, both globally and locally, have changed dramatically over the past few months. Retail sales in many sectors are falling and we’ve seen an increase in unemployment and cost of living indexes; especially in the volatile food, energy and health care markets, costs have increased significantly.

Yet despite these challenges, I would like to jump up on my soap box and scream, “Seize the opportunities.” There is still so much that is needed by people in this world, both globally and locally.

When people talk about “today’s economy,” most are referring to the macroeconomics of trends in gross domestic product, retail sales figures, inventory, industrial averages or some other economic indicators. No matter how dire these indicators may seem, there are always going to be business opportunities on a microeconomic level.

Capitalizing on those opportunities is the challenge. Many business owners are focusing too much on reacting to market changes rather than focusing on growing their businesses. I continually hear the refrain, “we will think about growth once the economy gets better.” The reality is that businesses can create their own economies by being proactive and building the doors to welcome opportunity.

Sure businesses may have to make adjustments to deal with the current market changes, but proactive business owners will always continue to seek areas for new business development. The following are areas to consider:

Grow Market Share – Now is an especially good time to pay closer attention to the competition. Some competitors may be offering less favorable credit terms, reducing inventory, providing less services or even closing their doors during this recession. All of these areas leave room for businesses to position themselves to gain more market share.

Add Product Service Lines – One of the new buzz words for small businesses is “diversity.” This refers to adding more product or service lines to meet other demands of an existing customer base. It is just a matter of paying attention to the needs of existing customers and finding product or service lines that meet these demands. Just make sure that new additions compliment, rather than replace existing product/service lines.

Innovation – Wherever there are problems, there remains opportunities to develop new solutions. Innovation is the seed to entrepreneurism. Since everyone is bemoaning their problems, be the solution finder! Innovation comes in different forms and scales, whether it is product improvement, service improvement or a completely new product/service entry into the marketplace. There are no bounds to innovation except feasibility – will this innovation generate a profitable business model?

Now is not a good time to be passive and wait for things to get better. Business growth is a function of developing a good plan and taking action to achieve specific goals. History has proven that it is those who create their own opportunities who sustain success. I think it is only fitting to conclude with a quote from another comedian, Jonathan Winters, who said, “If your ship doesn’t come in, swim out to it.”

Roller Coaster Story with a Tom Robbins Twist

I remember vividly my first date as with my high school sweetheart. I was sixteen years old and a beautiful girl in my French class asked me to join her at Six Flags Great Adventure in Jackson, NJ. I quickly accepted, looking forward to getting to know a little more about this girl that I had been admiring for sometime.

There was a slight problem with this venue for a first date. At that point in my life I had never been on a roller coaster and she kept talking about her two favorite rides at Great Adventure – “Rolling Thunder” and “Lightning Loops.” The anxiety of being on a first date is tough enough, but for me, the larger anxiety was that I would have to either experience a roller coaster for the first time and risk hurling next to the girl of my dreams; or I could be a wimp and explain to her that I was too scared to go on the roller coaster.

As silly as this sounds today, this over dramatic teenager seriously thought about canceling the date, fearing that I was in a no win situation. Luckily for me, what little testosterone I had at that age (I was a real late bloomer) kicked in and convinced me to just go for it.

As soon as we paid our admission to the park, my date high tailed it right to the line to get onto “Rolling Thunder.” The anxiety kicked in again as we waited in line. This psychosomatic nausea started as I was able to see the roller coaster go creeping up so slowly and then hurtling down at great speeds. Would I be able to handle that speed?

We made some small talk while waiting in line and I did my best to hide my fears. Once our turn came to get on, I was relieved that we did not end up in the front seat. Small victory, but I was still pretty anxious about the first impending drop. Once they locked the restraining bar there was no turning back.

I quickly turned to my date and told her that this was my first time on a roller coaster. She just laughed and told me to enjoy the ride. I guess I was hoping that she would tell that there was nothing to worry about, but she didn’t give me that satisfaction. As the coaster went on the first climb, I started to get a bit scared watching us get up to about 8 stories high, so I chose to focus my gaze on my date. I don’t know why, but as we reached that apex and the split second before our drop, I was overcome with a feeling that this was an awesome experience. It is amazing how sometimes your mind can process so many thoughts in such a short time. In that split second, I felt exhilarated. I was sitting next to a beautiful girl, I was having a fun day at Great Adventure, the sun was shining and the park just looked so beautiful from that vantage point. My date hooked her arm under mine, drawing me close to her, which just added to the moment.

As we began our descent, I was thrilled by the speed. My date and I were laughing, enjoying the ride as she snuggled close to me. After that, we held hands, hit every ride in the park and the perfect day ended up with me getting on my tiptoes (like I said, I was late bloomer) for my first kiss with my new girlfriend as she dropped me off at home.

So Rick, what’s the point? Feeling nostalgic? Maybe, it’s just that my head has been in a bit of a fog lately and I can’t help but think of roller coasters when thinking about the economy. Most people who are discussing the economy act as if we are in a free fall right now. Well if that’s the case, let’s enjoy the ride.

We all have our own set of unique problems. Right now, I am still trying to get over a real bad head cold and it has given me a quick break from thinking of this roller coaster ride. It is amazing how unimportant the economic news becomes as you think about trying to breathe clearly once again.

More than anything, I would love to put my big nose to proper use and savor the aroma of my morning coffee (roasted at Lakeside Coffee in Rouses Point) or the fresh, North Country air. I can’t right now, but wallowing in self pity won’t make me feel any better. I just have to take better care of myself and hopefully my immune system will do the rest of the work.

So I have been using all my free time to rest and enjoy one of my great pleasures, which is reading good fiction. I find that reading fiction allows my mind to wander and provides useful escape from the challenging realities of life. Right now, I happen to be reading “Skinny Legs and All” by Tom Robbins. I first read this book right after it was published in 1990. Tom Robbins has this magical way of spinning words and making serious social commentary on some pretty controversial themes, yet in a very light-hearted manner. This particular novel gets into some pretty taboo stuff that really belongs nowhere in a business blog or a commentary about the economy. At least that is what I thought until I came upon this little excerpt that made me think of this roller coaster economy yet again(and inspired me to add one more blog post):

“During periods of so-called economic depression, societies suffer for want of all manner of essential goods, yet investigation almost invariably discloses that there are plenty of goods available. Plenty of coal in the ground, corn in the fields, wool on the sheep. What is missing is not materials but an abstract unit of measurement called 'money.' It is akin to a starving woman with a sweet tooth lamenting that she can't bake a cake because she doesn't have any ounces. She has butter, flour, eggs, milk, and sugar, she just doesn't have any ounces, any pinches, any pints.”

Basically, we are paying attention to the units of measure, like the Dow Jones Average, rather than the actual supply and demand of products/services and the never ending competition to find our proper place in the market. Business owners that focus on the resources they have available can still find the means to bake that cake and measure their success.

Tom Robbins also wrote:

“The introduction of money, with its seductive, if largely ambiguous promises, added a fresh measure of zip to the sport of life, but the zip turned to zap when the players, stupefied by ever-shifting intangibles, began to confuse the markers with the game.”

Even though this book was written over 19 years ago, I find this passage to be so relevant to small business and the current economy. If you focus on the game, small business can be an exciting and profitable game. You just have to pay attention to the task at hand and the real indicators of success, not some outside market news.

One final excerpt from this book:

“The ones who’re so upset about everybody not being the same, about competition, about standards of quality…they’re usually people with average abilities and average minds. And below average senses of humor. Whether it’s a matter of lifting the deprived up or dragging the gifted down, they want everybody to function on their level. Some fun that would be.”

So continue to compete with your business. It may be a roller coaster, but it is a fun ride if you possess the right attitude. As Hugh Downs once said, “A happy person is not a person in a certain set of circumstances, but rather a person with a certain set of attitudes.” If we want to savor life, we have to choose to accept our circumstances with a positive attitude and proper perspective. We should also compete, not so much with each other, but with ourselves to achieve greater things.

Focus on what matters. Is it the game or the price of admission? We all have our own answers.

A Fish Story

I originally went to Alaska back in 1997 to help friends of mine, Jill Ramiel and Ken Alper, open up a bagel store -- The Silverbow Inn, in Juneau. One day, after helping build their bagel oven, I went fishing with the oven installation guy. He had a little skiff with an outboard motor and we were trolling for king salmon. This was my very first time salmon fishing and he helped be cut my herring bait at a bias so I could get that “sexy twirl” that drives the salmon crazy.

After fishing for about an hour, our outboard gave out. The oven guy, Randy, went to work on it while I just kept casting my line out and reeling it in slowly; trying to mimic the speed we were traveling at while trolling. Our skiff was drifting near the shore, which was fine by me, considering our motor wasn’t working. Meanwhile, Randy was getting frustrated that he couldn’t get the motor started. I guess he took it out on me a bit when he said, “Why the hell are you still fishing you idiot? The water is only about foot deep over here.”

I am a pretty stubborn guy and I threw my line in the water again; as I was reeling my line back in I got a huge strike. The line started screaming out of my reel and Randy started yelling instructions to me as I fought to land my very first salmon. Luckily, I hooked this fish pretty good, as I probably didn’t score many style points in landing this salmon. Randy netted it for me, and luckily, he got the motor started shortly thereafter so we could head back to the shop.

When we got back to the Silverbow Inn, we weighed in my prized king salmon at 38 pounds. Once the weigh in was completed, Chef Stefani Feller (now Marnon), who was helping open up the restaurant at the Silverbow, cleaned and marinated this fish. A group of friends then joined us on the rooftop picnic area that Jill and Ken had set up at their cool establishment and Chef Stefani grilled us the salmon. She handed me the first plate of fish. I declined, saying that I am not a big salmon fan. Well, I soon learned that when Chef Stefani hands you a plate of food, you don’t decline!

I then proceeded to savor one of the most delicious meals of my lifetime. There is just nothing better than grilled king salmon, especially if it was caught just a few hours prior. It was an amazing experience that I just had to share one more time (many of my friends have heard this story ad nauseum…sorry)!

Still, this is my small business blog and I need to relate this story to business. There are some subtle lessons that can be learned from this experience. First, be careful about listening to the naysayers. Maybe conventional wisdom was that not many salmon are caught that close to the shoreline. You obviously don’t see the big name fishing charters trolling for salmon in that part of Auke Bay. Yet you can go to the Silverbow Inn and look at the photo album they keep in the bagel shop and you will see a picture of me with my prized salmon.

Another lesson is to always accept a gift with proper respect. Luckily for me, Chef Stefani was kind enough to force me to eat what would be one of the best meals of my life. She could have easily been offended and dished out my portion to our other friends dining on the roof. Yet she just looked at me and sternly said, “You caught it and you are going to be the first to eat it.” In hindsight, I wish I would have accepted her offer with graciousness and with respect immediately after she handed me the plate. She used her amazing culinary talents and offered me a gift; to this day I am so embarrassed that I was that foolish to initially decline such generosity. My apologies to Chef Stefani and thanks again for giving me a second chance.

That second chance is another lesson to be learned. Sometimes we make mistakes the first time, but we are often given another opportunity to get it right. Luckily, I got back in her good graces by complimenting her culinary prowess enough that she even let me have a second helping when I asked.

The final lesson to be learned from Rick’s fish story is what was said to me as we were winding down the evening. I can’t remember which friend said this, but as we started talking about our next fishing day, someone chimed in with Lao Tzu’s maxim, “Give someone a fish and they are fed for a day, teach someone how to fish and you feed them for a lifetime.”

This is probably the best way to describe what business is all about. Some people think the secret to success in business is all about capital or access to funding. This is a huge misconception. There are plenty of businesses that have had access funding and they still fail. You can give someone all the money in the world; it may feed a business for a while, but it’s not invested in a sound business model, it will eventually be lost.

Business is about learning to be self sufficient. To be successful, it only takes the willingness to learn how to “fish.” There are various methods and some may work better than others. Yet it all boils down to learning how to most effectively use the skills you have to operate your business towards generating a profit. There needs to be some bait; something that has that “sexy twirl” to attract customers. Another important skill is learning how to budget your resources wisely, as some days the “fish” may not be biting.

Business requires a certain amount of skill, some trial and error, some patience and a little luck is always welcome. There are some good days and some bad days, just like fishing. I will conclude this fish story by paraphrasing a popular bumper sticker: “A bad day in business is still better than a good day at work.”

Responsibility and Accountability

I had a very difficult day at work yesterday and I am going to use this post as an opportunity to vent some frustrations. One of my fellow counselors received a phone call from a very irate client. In a nutshell, this person used quite a few expletives in explaining that we ruined their business and the advice we provided is driving their company to bankruptcy.

This happens every so often in our field of work. We have clients who want to start businesses, or who are already in business, and they expect us to tell them everything they need to know to be successful. We do our best to help, but sometimes things don’t work out. While we can provide technical assistance and offer best practices clients should consider, we cannot guarantee success. We also can’t conceivably think of everything a business must know before beginning their business. Every business is different and has different needs.

Yet when things go wrong, the blame game begins and sometimes we become the chief culprit. It’s certainly not a pleasant position to be in, but I can live with the fact that I am sometimes going to be a scapegoat if things don’t go well for a client who sought advice from our Center.

Still, every time there is a problem, I look for the lesson learned in the situation. In this particular case, I believe the lesson learned is something that I have already discussed in a previous post – small business owners need to learn to accept responsibility and accountability for what happens to their businesses.

I remember a time back when I owned my first two bagel stores. I was at my Pennsylvania store and I was having a really bad day. My baker messed up our wholesale deliveries and I had to deal with a very good, but very irate customer. On top of this, I really didn’t like the way our bagels were looking. Some bagels were too light, some were too flat and some were too wrinkly.

I was in a foul mood and I was complaining to Anthony, one of my partners in the business. “Dave really sucks,” I said, “he can’t follow simple instructions, he doesn’t pay attention to detail and he just doesn’t care about the quality of his work.”

Anthony just smiled at me and said, “Who was the idiot who would hire someone that bad?” Needless to say, that shut me up quickly. I mentioned in an earlier post how I learned to take responsibility and accept blame for everything that went wrong with my business. On this particular day, I forgot that lesson learned for a moment. With just one simple, not so rhetorical question, Anthony reminded me about the true root of the problem; I was placing blame rather than accepting responsibility for a problem that I, myself, created.

For the most part, I have been much better at accepting responsibility, but I have to admit there are times that I have fallen off the proverbial wagon. I try to catch myself, but I guess it is just human nature to try to avoid accepting responsibility at times. Well, maybe it is just Rick nature, but in any case, I know that little gets accomplished when we place blame, and quite a bit gets achieved when we accept responsibility and start focusing on solutions.

I truly am sorry for all the mistakes I have made and it hurts to know that I may have been responsible for other's misfortunes. I know my regrets are not going to fix the problem, so all I can do is ask for another opportunity to be part of the solution.

Theologian Reinhold Niebuhr is attributed with authoring the “Serenity Prayer” which has been adopted by Alcoholics Anonymous. I cannot think of a better way to conclude this posting:

“God grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.”

One Size Does Not Fit All

I head off to Albany today for a meeting with my colleagues from all over the State of New York. On our agenda at this meeting includes a discussion on the current economic conditions and how we can best counsel our small business clients to deal with the changes in the marketplace.

In previous posts, I keep telling my clients not to pay too close attention to the news, as the negativity about the state of our economy is influencing a sense of panic that my lead to poor decisions. As I meet with my colleagues, I plan to share a similar message, that despite the challenges, there are always opportunities.

Yet we also need to be cautious and realistic. No matter what counseling we provide, we are going to be faced with clients who may not be able to survive the economic downturn.

Both my fellow counselors and small business owners need to realize that there is not one "catch all" solution to the challenges in this marketplace. If something is working today, it may not work as well tomorrow. As Will Rogers used to say, "even if you are on the right track, if you just sit there you are going to get hit by a train." Operating a business is a dynamic process that requires continued attention and different courses of action at different times.

We can counsel clients to keep better track of market trends, to manage their inventories better, get on top of receivables, develop more effective marketing plans and many other best practices. But each individual business owner has their own particular economy that they have to watch. Even in the same region, some sectors may be poised for great opportunities, while others are more susceptible to the changes in consumer spending habits. And what is happening today will surely be different tomorrow, so business owners have to be poised for change.

The best thing we can do is help our clients keep focused on their own particular markets. Our main task as counselors is to help clients deal realistically with their specific challenges they face and remind them to continue to look for areas for new business development. This is something that applies always, whether times are good or bad.

Before I head out on the road, I wanted to contradict my previous advice and share a link to this article from our local newspaper. Please pay close attention to this story!


Clinton County Sales Tax Way Up

As I've been saying, every economy is different and opportunities remain for small business owners. Seize the day and look for ways to grow your business.

Keeping Score to Win

Today I will be watching the Super Bowl along with millions of others. I thought it is only fitting to add a little sports analogy to my business blog.

The Cardinals take on the Steelers tonight and the team that scores the most points will win. It's pretty simple, we tally up all the touchdowns, field goals, point after touchdowns (1 or 2 point conversions) and safeties. The team that ends up with the most points in the one hour of playing time will win (unless it goes to overtime).

In business, there are also scorecards. These are what I refer to as the holy trinity of financial statements -- the cash flow sheet, the profit & loss statement and the balance sheet. Unfortunately, too many small business owners do not pay close enough attention to these scorecards.

The problem is that too many small business owners try to operate their businesses on an intuitive basis. I was certainly guilty of this in the past, and that is the reason why I did not maximize my the performance of some very successful businesses. Some business owners tend to focus on only their cash balance in their checking account or their year end profitability. Others may track their inventory levels or accounts receivable balances or maybe they judge performance by how much they still owe to the bank.

Still the fact remains that business owners would be more successful if they developed a more holistic understanding of financial statements, and more importantly, some of the key performance indicators that dictate success for their particular industries. Sometimes, cash flow decisions can hurt profitability or vice versa and business owners should think about both aspects when making business decisions.

Forecasting successful operations means keeping score and establishing specific measures of success. Business is definitely a competitive enterprise and with competition their needs to be some performance measures. Keeping score means tracking transactions, whether it is through a manual ledger or a computer accounting system.

I encourage all small business owners to revisit their business plans and set up specific financial goals for the next few months. Keep score and try to exceed those goals.

One of the benefits of keeping score in your business vs. the sports world is that you can establish your own goals for winning. You can set the profitability measures, the cash flow balances and the net worth you hope to achieve. Still, you have to keep score to win.

Beyond Hope is Action

Like so many Americans, I was inspired by the inauguration of our new President, Barack Obama. My initial impression is that he is an eloquent speaker, a caring soul and a thoughtful leader. His comprehension of the complex issues related to governing this great nation appears to be strong and he seems poised to foster an improved level of cooperation and bipartisanship among our lawmakers.

Millions of Americans flocked to Washington, D.C. for one of the greatest celebrations of the 21rst century. In Barack Obama's inaugural address, he said, “We have chosen hope over fear,” yet he was also sobering in reminding us of the challenges that remain, both from an economic and a national security standpoint.

It was a historic day on January 20, 2009 and it was a great day for the United States of America. “Hope” was a word that was used quite a bit throughout the day. It is a beautiful word that spurs dreams of promise and opportunity. It can be used as a noun or a verb. We can possess hope or we can hope something will happen (thanks Ms. Lierni, Oak Tree Elementary School).

President Obama can inspire us with hope the noun, but if we utilize hope the verb too much, nothing will get accomplished. Hope is not an action verb; it is a passive verb (thanks Ms. Ward, John Adams Junior High). I can hope I don't get hit by a train, but I will if I just sit on the tracks and hope. I have to move, jump, run, walk or take some other action beyond hope if I am going to survive.

As we take to heart the inspiring words of our new President, the reality is that if we expect things to change we have to take action and not just hope for change. Barack Obama also added, “Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America - they will be met.”

While some people may have listened to his words and heard a promise, I heard a call to action. He went further to remind us of the words that George Washington spoke during the Revolutionary War, before his famous crossing of the Delaware River, "Let it be told to the future world...that in the depth of winter, when nothing but hope and virtue could survive...that the city and the country, alarmed at one common danger, came forth to meet (it)."

It was a historical day for our nation, yesterday and many of us were inspired and filled with hope. Yet President Obama alone will not solve our problems. We can hold on to the hope from his message, but beyond that we all need to use our minds, our strengths and our passions to meet the challenges facing our nation. There is nothing stopping us from making tomorrow another historical day with a new accomplishment of grand scale.

How does this relate to small business? Well, I have to admit I am slightly off topic again. Yet our economy is driven by small businesses and I am tasked with helping our clients operate more successful businesses. To me, President Obama's call to action has only inspired me further to do my part and help our clients bring their dreams to a successful business reality. It starts with hope, but the achievement only comes with a good plan and a commitment to action.

I Refuse to Participate in This Recession

I was at a very inspiring meeting in Lake Placid this morning. At the meeting, Jim Williams, from radio station WSLP, gave me a button that said, “I refuse to participate in a recession.” I quickly put the badge on and wore it with pride!

Mr. Williams also sent me a link to a video by Dr. Ivan Misner, who is the founder and chairman of Business Networking International. Here is that same link:

http://www.youtube.com/watch?v=9266NvfUHrk

While I give my usual disclaimer that this is not an endorsement of any particular product or service, I will not hide my feeling that that Dr. Misner is a kindred spirit. His message resonated and clearly articulated so much that I have been trying to communicate in previous posts.

I hope you listen to his message, but if not, at least let me share this quote that came out of his inspiring monologue, “Don't let a bad economy be your excuse for failure; instead, make it your opportunity to succeed!”

I think back to that last article I referred to in my previous post. Some of those businesses interviewed claimed the economy was forcing them to close. Looking at some of the businesses and the reasons given for their difficulties, I just had a hard time accepting that the economy was the root cause of the problem. I obviously don't have access to all the details from these businesses and I don't want to diminish any of the challenges they have faced. Yet, I still refuse to believe all opportunities were exhausted.

Opportunity comes in many forms. Adding product or service lines, expanding markets and, the granddaddy of all opportunity, developing innovation -- finding new solutions to meet market demands.

As Dr. Misner said, this is not an attempt to ignore reality. There are real problems in so many areas of our economy. But we can't pull a magic blanket over heads and hide. Rather than dwelling on all the problems, we can choose to seize the opportunity to be a part of the solution.

I welcome you to join Dr. Misner, myself and all the others who refuse to participate in a recession. Choose instead to be a part of a recovery.

Since I was a young child, I have admired the writings of Shel Silverstein, author of the “The Giving Tree.” I share this poem of his:

Listen to the mustn'ts child.
Listen to the don'ts.
Listen to the shouldn't haves, the impossibles, the won'ts.
Listen to the never haves, then listen close to me.
Anything can happen child.
Anything can be.

Survival of the Fittest

Another gloom and doom story about small businesses in this economy has somehow managed to make its way into the mainstream media. I found this Associated Press (AP) article on the homepage of MSNBC.com before heading to work this morning. The title, Small Businesses Struggle to Survive Downturn obviously caught my eye.

First and foremost, the struggle to survive is a daily consideration for most small businesses. At any time, in any economy, there are factors that threaten every businesses' very survival. Natural disasters, new entry of competition, the health of the leadership team; there are so many other possible factors that could extinguish the livelihood of a small business, it is a wonder that so many people still consider it the American Dream to pursue business ownership.

Like in nature, business mortality is an unfortunate reality. Survival is reserved for those businesses that are poised to grow and adapt. The businesses that can evolve and meet the changing demands of the marketplace will ultimately succeed and those that can't will not survive.

If you could indulge me, I would like to address some specific claims in this article. The following bullet points are contained in just one paragraph of this article:

* Financing is hard, if not impossible, to come by
* Vendors are being skittish about extending credit for inventory
* Rents are rising
* And profits are falling — or vanishing altogether as sales slip

First of all, I know a number of lenders in my area who are trying to fight this misconception that financing is impossible to come by. The credit markets are not frozen and credit is quite available. Of course banks are learning their lessons from some of the looser underwriting practices that allowed defaults to increase. They are paying closer attention to the borrower's capacity to service any new financing. Yet banks can't succeed without lending out money. Lending money is still an income source for them and I know of a number of financial institutions that are still quite eager to extend credit.

And banks are not the sole source of financing. For ventures that require a little bit more risk than what banks may be comfortable in underwriting, now is a perfect time to consider private equity. There are investors out there who have money sitting on the sidelines waiting for that right deal to come along. The prospect of having a more intimate review of a business model may be enticing in these days of corporate greed and mismanagement. The key is to craft an investment deal that provides a win/win situation. More flexibility to the business owner and a good prospect for return on investment to the investor.

To address the comment about vendors being skittish about extending credit for inventory, I would like to know when have vendors not been skittish about extending credit? Nothing has changed here. Vendors are always enticing their customers to pay quicker, but if they don't want to experience their own drop in sales, they are going to make some deals and extend credit terms. Maybe not for those businesses that have abused credit terms in the past, but again, that is another form of business Darwinism. Vendors are looking for the right partners to bring their products to the marketplace and they are going to pair up with the stronger businesses who have show a commitment to making timely payments.

The comment that rents are rising baffles me to a certain extent and contradicts so much that I have been hearing with all the gloom and doom economic data on the fall of property values. Yes, I know there have been some property tax issues in various communities, but with the fall of property values, the increased tax rates will eventually be offset by the decrease in property values. Now is a great time to consider negotiating lease terms. Many landlords that I know have been rewarding their long term tenants with discounted lease extensions and it is up to each individual business owner to negotiate the best terms to meet their needs. Of course, it has to be reasonable and beneficial to the landlord, as well. But just because the MSNBC article says rents are rising, don't believe it until you get the bill. And if rents are indeed rising, decide what you are going to do to adapt to this change.

The final claim from the MSNBC article that I will address in this post is that profits are falling or vanishing altogether as sales dip. I am absolutely astounded by this astute financial observation. If I may be as bold, I offer my own prognostication that if you jump into Lake Champlain, you are bound to get wet.

I apologize for being so flip, but sometimes stating the obvious just isn't the answer. Survival in operating a small business is definitely a challenging prospect, no matter what state of our economy. Yet there are plenty of resources for those who wish to find solutions. Our NYSSBDC Research Network has published some good articles on their blog. Here is a link to one:

http://sbdcrn.blogspot.com/2008/12/recession-survival-guide.html

While searching for other resoources to help business owners, I came upon this excellent article by Christine Corelli:

http://www.creativeimpactgroup.com/PDF/Generatingbizchallengingeconomy.pdf

I am also a big fan of these two retail blogs:

http://www.ricksegel.com/blog/

http://bobphibbs.wordpress.com/

As I noted in other posts, your business can also contact a local Small Business Development Center counselor to help you develop specific strategies to deal with challenges or to explore new opportunities to grow your business.

W. Edwards Deming is known for developing the management training that was shunned by many American companies and often attributed with leading the revolutionary improvement of Japanese manufacturing practices. The author of the great management book, Out of Crisis, Mr. Deming once said, “Learning is not compulsory... neither is survival.”

Work the Plan, Not the Idea

I've often commented that my clients like to ask me what I think of their ideas. My standard response is, “you have a great idea, now let me see your plan.” Here is where my clients reactions to this will vary, as some clients will show me their drafts and others will ask how to go about writing a plan. Unfortunately, a good number of others will tell me that they don't have the time to be bothered with this process. My feeling is that if you don't have time to plan, then you don't have the time to achieve success.

I don't care how great the idea may be, the actual process of developing a business should involve a planning process. And planning is not just an exercise of putting your idea on paper. It is a process where you think about how you are going to make your business work.

It is actually a fairly simple process and I like to refer to what I call “the four cornerstones of success” that are the foundation of any successful business. This includes:

* Marketing
* Operations
* Financials
* Leadership

The planning stage should encompass a process that will bring your vision into reality. From the marketing perspective, this involves thinking about who will be your customers, what is your competition for those customers and what message will you send to effectively entice enough of them to purchase your product or service.

On the operations side, this is envisioning the process of everything it takes to produce your product or service and effectively deliver it to your customers. It should also involve contingency planning for things that can interrupt this process.

The financial side of planning involves thinking about how much it will cost to start or expand your business and the holy trinity of financial documents: cash flow statements, profit and loss statements (or income statements) and the balance sheet. Since you are in the planning process, you should plan what they will look like in the future. Usually a three year period is a good starting point (projections are sometimes referred to as pro formas)

Leadership is identifying the direction and goals for your business. It also identifies who will be responsible for the different roles in managing the business and should include some accountability for what dictates success. I've written in a previous post that everyone should own a number. The business plan is a great starting point to identify who owns which numbers.

Probably the most frequent question I get about the business plan is, “How long should it be?” My answer is always, “As long as it needs to be.” Ask a good question, get a good answer!

First of all, as long as the business is going, the planning process never ends. It is something that should be revisited and refined over and over again. I refer to a great book by James D. Murphy, entitled Flawless Execution. Mr. Murphy is a retired Top Gun pilot from the U.S. Air Force who runs a business consulting firm, named Afterburner. In his book, he refers to a cyclical process that involves the Plan, the Briefing, the Execution of the Plan, the Debriefing and then the process begins over again. I highly recommend this book to those who are serious about improving their businesses.

While the business planning process never ends, there are obviously times when your business plan will need to be presented. Usually, it is because financing is needed for the business and any reputable investor, whether it is a banker or a private investor, will want to see a business plan before making an investment decision.

Of course, if you want to get a positive response from a potential investor, you have to think about what they want to see in a your business plan. The key in the business plan is to sell your plan for success, not the idea. The biggest mistake I see in most business plans is it focuses too much on what is wonderful about the proposed product or service, rather than focusing on how the business will be successful and, more importantly, why this is a wise investment decision for the potential investors.

While I am not going to speak for bankers and say that they could care less about your business proposal, certainly they are more concerned with how they are going to be paid back rather than consider how wonderful your business idea may be. So think about risk and reward analysis in your business planning process.

Speaking of risks and rewards, I can't stress enough the importance of the business planning process to assess feasibility of your proposed business start-up or expansion. Think about the risks and rewards as they relate to your particular situation. While the your business plan may have a good chance of providing you the opportunity to do something you love, it may not provide enough financial rewards to justify the financial (as well as time) investment you may have to make.

There are a number of great resources for providing assistance in writing business plans. Consider visiting your local SBDC as a good starting point (go to the "Find Your Nearest Small Business Development Center" and search by zip code or State).

I also provide a caution about paying someone to write your business plan for you. While you may use a consultant to provide advice for you in assessing market potential, develop operating systems or to help you format financial documents, the business plan has to come from you.

“Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” Tom Landry