Challenges Everyday

Today I will be joining the Pfizer Transition Council as we work on our response to the Pfizer closings that will result in the reduction of over 600 workers up here in the North Country. The team I am working with is tasked with two major duties:
* Be prepared to assist workers looking for new opportunities for employment, with self employment being one of their options
* Assist existing businesses prepare for the market changes that are likely to occur due to this dramatic workforce reduction

While I am certainly concerned about the economic impacts of this closing, the reality is that this is just one challenge that existing small business owners have to face. As Garry Douglas, Executive Director of the Plattsburgh-North Country Chamber of Commerce, said at our first meeting, "Unfortunately, this is an area where we have some experience."

These market blips have happened before and, unfortunately, they are likely to happen again. Every day in business is a challenge and small business owners have an ongoing responsibility to prepare for contingencies in market changes. There will always be those business owners that are reactive; that is, they only deal with a problem when it arises. Many of them will come up with great strategies to deal with those situations and our office is prepared to provide them with assistance as they develop their plans.

I've written before that there is a certain Darwinian aspect to business survival. As he said, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” The same holds true for small businesses.

Still, the best strategy is to follow the key advice that Stephen Covey identifies in his best selling book, "The Seven Habits of Highly Effective People." The small business owners that are proactive, that continually take measures to grow their markets and develop contingency plans so they are prepared for market changes are likely to be more successful. It is much easier to adapt to change if you are prepared for change.

The reality is that there will be new challenges everyday, so be prepared to adapt. Yet there will also be new opportunities for growth, so plan for that, as well!

Building Doors

When addressing the attendees at our open house yesterday, I used one of my favorite quotes from Milton Berle, "If opportunity doesn't knock, build a door." Many of the small business owners in that room have already started the construction of new doors in the North Country of NY.

While our clients in attendance were part of a very diverse group of small business owners, they all share a common trait of accepting responsibility for their own income generation. They aren't looking to the government or "the economy" to create their jobs, they are going out and creating their own opportunities.

It is this acceptance of responsibility for self determination that truly drives our economy. Furthermore, it is much more likely that these businesses will generate the innovation that will seed the opportunities of the future.

Each day as they operate, these small business owners are faced with many challenges as they try to sustain success. Yet they keep opening the doors to new opportunities every time it comes knocking and when it doesn't, they will be the first to start building new doors.

During my comments, I don't think I recognized them enough for what they contribute to our community. They are the engine that drives our economy. No matter how tough things may get, they keep on moving forward and developing new strategies to keep commerce in the North Country. Thanks for what you bring to our community and thanks for sharing your stories of success.

Open House at North Country SBDC

Today we are having an open house at the North Country Small Business Development Center (SBDC). We have invited our clients who are willing to share some insight on our counseling services so local stakeholders can get a better understanding of the depth of counseling that we provide to small businesses.

For those not familiar with what an SBDC does, the core to our services it to provide:

* Free and confidential, one on one business counseling
* Business training seminars
* Research assistance

We are part of a network of over 23 centers in the state of NY and over 1,000 centers in the United States. To find the center nearest to you, you can go to this website.

Association of Small Business Development Centers Website

As a former small business owner, it is easy to recognize the value of our services. While it is probably not the best thing to say that I made so many mistakes operating my businesses, the reality is that is true.

Yet the value we provide is that we can help our client from making the same mistakes we have made. We also share best practices to help small business owners from making mistakes and can be there to help any business owner troubleshoot specific business challenges. Of course, we don't make the decisions, that is the responsibility of the small business owner; but we certainly have a strong network of resources to provide the tools for our clients to make better informed decisions.

So if you happen to be in the Plattsburgh vicinity today, stop by our open house from 1:00 - 4:00 and join us. If you happen to be in business, get to know your local SBDC counselor and see what they can do to help your prosper!

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?