I posted an interview the other day the Becky McRay had with Bob Phibbs, the Retail Doctor. Becky McRay is one of the contributors to Small Business Survival, a great rural and small town business resource website. One of the questions Ms. McRay asked was, "Limited workforce is another big issue in small towns. Are there special techniques retailers can use to manage their smaller workforce?"
I would like to take an unsolicited opportunity at share my thoughts on this question. I think many small business owners in rural regions often look at their labor pools as being a challenge due to the limited number of workers. I prefer to look at this as more of an opportunity.
There is an old saying used by HR professionals to "hire for talent, train for skills." In rural regions, there may be some limits to the number of workers to choose from, but there is a tremendous amount of talent to be found in remote regions. Talents include things like being polite, taking initiative and determination to exceed expectations.
In small towns, talents are often easier to recognize. As it is difficult to judge whether someone has talents from just a quick interview, the benefit of knowing a little background on a candidate prior the interview provides a huge benefit. Talents are often best recognized by some level of familiarity with the person and small business owners in rural communities should always keep their eyes open for those who display talents. Sometimes the best way to recognize talent is to notice that special teammate on a sporting team who may not have had the been the best athlete, but who always gave 100% effort and tried to be a helpful contributor to the team. Talent can be found in that Boy/Girl Scout, 4H club member or Key Club member who took the initiative to develop a special project for the county fair. Maybe you will recognize talent in that special volunteer at the local picnic who was cleaning up long after most others left. If you are not familiar with a particular employee candidate, it's not hard to find someone who is in a small community.
Once you recognize talent, making your company the employer of choice is the next task. While larger employers often have access to more resources and better comprehensive benefit plans, the intangible benefits of working for an employer that cares will often attract the best employees. You may not be able to offer all of the benefits that they offer, but by creating more pleasant worker friendly atmosphere, offering flexible scheduling and more personalized training your company stands a good chance of attracting that talent. Of course, should you attract that talent, personal recognition for a job well done and offering opportunities for growth within your organization may be necessary to retain those talented individuals.
I can't emphasize enough the dividends that talented employees offer an organization. Another competitive advantage small employers often have is that they don't manage by just the numbers. There is a recognition of what I refer to as intangible productivity.
With the five businesses that my wife and I have owned, we have had the pleasure to have many very talented employees and the success of our businesses was greatly attributed to their efforts. Productivity is something that can be measured fairly easily. At our bagel stores or taco restaurant, we could measure production times for various kitchen duties or sales per labor hour for our cashiers like other large corporations do.
Yet, beyond those measures, there are many intangible levels of productivity. How do you quantify the value of that worker that is willing to go the extra mile to make a customer feel special? Hidden in the gross sales of your income statement may be the sales from that one customer who patronizes your business over and over again because they like that special employee. The financial statements can't accurately measure opportunity lost when a customer walks out of a store simply because they found the atmosphere cold and impersonal. Small businesses have the competitive advantage in paying attention to these details and in training their workers to utilize those talents to help grow the business.
Furthermore, there is a team dynamic that often can't be measured. I compliment my wife for her ability to recognize the strengths of her workers and adjust the roles within the organization to get the most out who she has available for a more productive day. Large companies make the employees do the task at hand and rarely flex the tasks that need to be done to build a base of loyal customers around the strengths of the employees available at a given time.
As with many of my posts, the onus is on the small business owner to take responsibility for the leadership of their own company. Building a team that gives tangible results from the intangible productivity takes effort to coordinate the talents available and give them a clear direction. As H. Jackson Brown, Jr. once said, “Talent without discipline is like an octopus on roller skates. There's plenty of movement, but you never know if it's going to be forward, backwards, or sideways.”
Move your company forward by finding the the best workers and giving them the guidance necessary to enhance the profitability of your business.
Sunday, August 22, 2010
Friday, August 20, 2010
Hometown Retailers
I just want to repost this interview with Bob Phibbs, as I think he offers some excellent advice - http://bit.ly/d2v0C8
I will be adding a follow up response to one of the interviewer's questions in a later post, as it really made me think about some past experiences I have had with my small town businesses. I promise to write sooner!
I will be adding a follow up response to one of the interviewer's questions in a later post, as it really made me think about some past experiences I have had with my small town businesses. I promise to write sooner!
Wednesday, August 11, 2010
Fool Me Once
I made a very expensive mistake in helping my wife with her business. It is embarrassing to admit my foolishness, but hopefully my lesson learned may benefit some other small business owners out who will heed my advice to be very selective when choosing a merchant service provider.
Last year, I helped my wife choose her merchant service provider for her business. Unfortunately, I did not read our agreement carefully enough and recently had to pay some unexpected fees when she closed her account upon selling the business.
The reason I say unexpected, is because I thought I carefully questioned the salesperson on the phone about the terms of their merchant services. I asked very specific questions about discount rates, monthly fees and terms of service. He verbally told me that it was only a one year agreement (which we fulfilled), he clearly outlined the monthly fee for service, provided the discount rates and assured me that there would no fee for cancellation if we completed one full year of service. Unfortunately, what he said and what was written in the contract that my wife signed did not match up.
The reality is that I was not thorough enough in reading all the documents that he sent to my wife to sign after our discussion. I have no legal recourse and I have no one to blame but myself for not paying attention to the details in this merchant agreement.
If your business is considering choosing merchant services, I suggest reading this article of some fees you can expect to encounter when choosing a merchant service. 7 Merchant Fees to Look Out For. I provide the disclaimer that this is not an endorsement of any particular merchant account service provider.
Remember that a merchant service agreement is a legal contract and no legal document should be signed without some due diligence. When choosing merchant services, you should never feel pressured to make a quick decision. While not all salespeople are disingenuous, the reality is that most merchant service representatives get paid to sell services, not to help you understand the details in the contracts that you sign.
In my case, by not thoroughly reviewing the details in our merchant agreement, I cost my wife and I our planned summer vacation for this year. It was expensive, but this fool learned one more important life lesson. Sacha Guitry once said, "Our wisdom comes from our experience, and our experience comes from our foolishness." At least I can say that I gained some more wisdom.
Last year, I helped my wife choose her merchant service provider for her business. Unfortunately, I did not read our agreement carefully enough and recently had to pay some unexpected fees when she closed her account upon selling the business.
The reason I say unexpected, is because I thought I carefully questioned the salesperson on the phone about the terms of their merchant services. I asked very specific questions about discount rates, monthly fees and terms of service. He verbally told me that it was only a one year agreement (which we fulfilled), he clearly outlined the monthly fee for service, provided the discount rates and assured me that there would no fee for cancellation if we completed one full year of service. Unfortunately, what he said and what was written in the contract that my wife signed did not match up.
The reality is that I was not thorough enough in reading all the documents that he sent to my wife to sign after our discussion. I have no legal recourse and I have no one to blame but myself for not paying attention to the details in this merchant agreement.
If your business is considering choosing merchant services, I suggest reading this article of some fees you can expect to encounter when choosing a merchant service. 7 Merchant Fees to Look Out For. I provide the disclaimer that this is not an endorsement of any particular merchant account service provider.
Remember that a merchant service agreement is a legal contract and no legal document should be signed without some due diligence. When choosing merchant services, you should never feel pressured to make a quick decision. While not all salespeople are disingenuous, the reality is that most merchant service representatives get paid to sell services, not to help you understand the details in the contracts that you sign.
In my case, by not thoroughly reviewing the details in our merchant agreement, I cost my wife and I our planned summer vacation for this year. It was expensive, but this fool learned one more important life lesson. Sacha Guitry once said, "Our wisdom comes from our experience, and our experience comes from our foolishness." At least I can say that I gained some more wisdom.
Wednesday, July 21, 2010
It's The Value, Stupid!
It was during the 1992 election, when Bill Clinton's campaign staff coined the phrase, "It's the economy stupid!" While this refrain has earned its place in our pop culture, it is more than just catchy slogan. It contains a valuable lesson, to not forget what the populace really wants.
This lesson transcends politics and could easily be applied to small business management and, more specifically, it relates to the core to developing a successful marketing strategy. Marketing is a complex subject and a single blog post could not come near to covering all the intricacies in developing a successful marketing plan.
As I work with my clients on their marketing, I often listen to them tell me about their ad campaigns and how they are going to market their businesses via brochures, newspapers, radio, television, social media and various other channels. Often they will talk more about their media rather than focusing on their message. When it comes to developing an effective marketing campaign, to paraphrase the political quote, "It's the value, stupid."
If a company hopes to be successful, it simply must provide some value to the marketplace. It doesn't matter how creative you may be or how much you spend, if the customers don't find value in your products or services, you won't have success with marketing.
I recently read an interesting article about the Old Spice Ad with the actor saying, "I'm on a horse." Despite the exposure this ad has had on national television, and the fact that this ad has resurfaced on YouTube and received an additional 2.9 million views, sales of the actual product being promoted have dropped by 7%.
Why hasn't the success in the number of views and popularity of the ad not been reflected in the sales of the product being promoted? While I certainly don't speak for every male who purchases body wash, I just don't find anything in that commercial that shows me the value of Old Spice body wash.
I find the commercial to be silly and perhaps there is some entertainment value in the ad. Yet after watching the commercial a couple of times, I noticed that the actual "Old Spice" product or logo is only visually displayed for 13 seconds of the 30 second commercial. The name "Old Spice" is only mentioned twice. While I didn't do scientific research on this, my guess is that more people refer to this commercial as the "I'm On a Horse" ad rather than the "Old Spice" ad.
Perhaps the ad is clever and memorable enough to get past the lack of product placement, but it still does not give me the desire to go out and buy this body wash. Maybe it is because he is addressing the ad to women and I happen to be a man. Let's assume for a moment that it was my wife who made the body wash purchases in our household (which is not the case) and she was swayed by the line, "sadly, he's isn't me...but he could smell like me." How do you think her insecure husband would feel about this? Even if I was secure, do you think I would appreciate getting this body wash from her? Does the advertising agency not get this?
We live in a world with a fickle marketplace, where emotion often trumps logic when it comes to studying the results of past marketing successes. While some marketing success stories may seem baffling, one can usually find a value proposition behind every successful campaign. Here is a link to an article on the top 100 advertising campaigns - Top 100 Ads. While I'm not familiar with all the ads, in most cases these ads clearly define some form of value proposition to go along with the creativity of the campaign.
When marketing a product, the heart of your endeavor is to convince the consumers that your product or service has some benefit to them that is better than what the competition has to offer. Looking at the successful campaigns, you can usually define what is special about the product. Sometimes, it is blatantly obvious such as Campbell Soup's, "Mmmm, Mmmm Good," which is clearly promoting that their soup tastes good. Other times, the value proposition may be a bit more abstract, such as Nike's "Just Do It" campaign. While this ad campaign did not spend much time highlighting anything special about a specific Nike product, their is no denying that clear intent to associate the brand with athletics, fun, style and achievement.
As you search for a value proposition for your products or services, it is best to keep in mind the 4 P's of marketing. They are:
* Product (product/service quality)
* Price (fiscal value)
* Place (ease of possession/convenience)
* Promotion (branding and consumer recognition)
In one or more of the areas above, you should be able to differentiate what makes your product better than the competition. So before putting together an ad campaign that may achieve the viral success, make sure you have a message that will convert the views into sales. The market planning may not be easy, but the goal is simple - it's the value!
Going back to the Old Spice commercial, my guess from viewing that commercial is that they were trying to differentiate Old Spice as the brand for a "man's scent." Click on this link to an older Old Spice Ad. It says the same message, with a similar sense of humor. Yet at the same time, it would be inoffensive for either a man or woman to buy an Old Spice product after viewing this ad. Unfortunately, the "I'm on the horse" commercial sends mixed messages and both men or women could find reason to feel uncomfortable about buying that product after viewing that ad.
As I noted earlier, marketing is a complex topic and there is quite a bit involved in developing a successful marketing campaign. Winston Churchill once said, "However beautiful the strategy, you should occasionally look at the results." If your marketing is not producing the desired results, revise your strategy. But start with the basics - define the value!
This lesson transcends politics and could easily be applied to small business management and, more specifically, it relates to the core to developing a successful marketing strategy. Marketing is a complex subject and a single blog post could not come near to covering all the intricacies in developing a successful marketing plan.
As I work with my clients on their marketing, I often listen to them tell me about their ad campaigns and how they are going to market their businesses via brochures, newspapers, radio, television, social media and various other channels. Often they will talk more about their media rather than focusing on their message. When it comes to developing an effective marketing campaign, to paraphrase the political quote, "It's the value, stupid."
If a company hopes to be successful, it simply must provide some value to the marketplace. It doesn't matter how creative you may be or how much you spend, if the customers don't find value in your products or services, you won't have success with marketing.
I recently read an interesting article about the Old Spice Ad with the actor saying, "I'm on a horse." Despite the exposure this ad has had on national television, and the fact that this ad has resurfaced on YouTube and received an additional 2.9 million views, sales of the actual product being promoted have dropped by 7%.
Why hasn't the success in the number of views and popularity of the ad not been reflected in the sales of the product being promoted? While I certainly don't speak for every male who purchases body wash, I just don't find anything in that commercial that shows me the value of Old Spice body wash.
I find the commercial to be silly and perhaps there is some entertainment value in the ad. Yet after watching the commercial a couple of times, I noticed that the actual "Old Spice" product or logo is only visually displayed for 13 seconds of the 30 second commercial. The name "Old Spice" is only mentioned twice. While I didn't do scientific research on this, my guess is that more people refer to this commercial as the "I'm On a Horse" ad rather than the "Old Spice" ad.
Perhaps the ad is clever and memorable enough to get past the lack of product placement, but it still does not give me the desire to go out and buy this body wash. Maybe it is because he is addressing the ad to women and I happen to be a man. Let's assume for a moment that it was my wife who made the body wash purchases in our household (which is not the case) and she was swayed by the line, "sadly, he's isn't me...but he could smell like me." How do you think her insecure husband would feel about this? Even if I was secure, do you think I would appreciate getting this body wash from her? Does the advertising agency not get this?
We live in a world with a fickle marketplace, where emotion often trumps logic when it comes to studying the results of past marketing successes. While some marketing success stories may seem baffling, one can usually find a value proposition behind every successful campaign. Here is a link to an article on the top 100 advertising campaigns - Top 100 Ads. While I'm not familiar with all the ads, in most cases these ads clearly define some form of value proposition to go along with the creativity of the campaign.
When marketing a product, the heart of your endeavor is to convince the consumers that your product or service has some benefit to them that is better than what the competition has to offer. Looking at the successful campaigns, you can usually define what is special about the product. Sometimes, it is blatantly obvious such as Campbell Soup's, "Mmmm, Mmmm Good," which is clearly promoting that their soup tastes good. Other times, the value proposition may be a bit more abstract, such as Nike's "Just Do It" campaign. While this ad campaign did not spend much time highlighting anything special about a specific Nike product, their is no denying that clear intent to associate the brand with athletics, fun, style and achievement.
As you search for a value proposition for your products or services, it is best to keep in mind the 4 P's of marketing. They are:
* Product (product/service quality)
* Price (fiscal value)
* Place (ease of possession/convenience)
* Promotion (branding and consumer recognition)
In one or more of the areas above, you should be able to differentiate what makes your product better than the competition. So before putting together an ad campaign that may achieve the viral success, make sure you have a message that will convert the views into sales. The market planning may not be easy, but the goal is simple - it's the value!
Going back to the Old Spice commercial, my guess from viewing that commercial is that they were trying to differentiate Old Spice as the brand for a "man's scent." Click on this link to an older Old Spice Ad. It says the same message, with a similar sense of humor. Yet at the same time, it would be inoffensive for either a man or woman to buy an Old Spice product after viewing this ad. Unfortunately, the "I'm on the horse" commercial sends mixed messages and both men or women could find reason to feel uncomfortable about buying that product after viewing that ad.
As I noted earlier, marketing is a complex topic and there is quite a bit involved in developing a successful marketing campaign. Winston Churchill once said, "However beautiful the strategy, you should occasionally look at the results." If your marketing is not producing the desired results, revise your strategy. But start with the basics - define the value!
Saturday, June 19, 2010
Need Money?
A short time ago, we had a small get together and two local lenders gave some "Straight Talk" about what it takes to get bank financing for your small business. We had some great questions from the audience and Lisa Roberts from Champlain National Bank and Allen Racine from Glens Falls National Bank provided some information on fostering better relationships with your banking partners.
One of the items that we discussed included dispelling the myth that "Banks only want to lend you money when you don't need it and they don't want to lend to people who need money." This is not a new sentiment, nor does it relate to the so-called "credit crisis" of the past few years. Mark Twain is reported to have said, back in the 19th Century, "A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain."
Banks need to lend money to make money and my guess is that most commercial lenders out there would welcome an increase to their business loan portfolios. Yet at the same time, we have to remember that bankers only make money on their loans if the customer can make the loan payments.
Both bankers noted that what banks do is "manage risk." They lend, using resources from customer deposits, money their clients require today and expect to be able to pay back in the future. For the privilege of getting this money in advance, the borrower pays interest to the banks.
Of course, there are no guarantees of future performance, so the banks are assuming risk in using their assets. Bankers want to help their small business clients, but they also have a responsibility to their depositors to carefully assess risk and ensure those loans are paid back. They manage this risk by using what is often referred to as the five C's of financing:
* Character - the borrower's credit history and demonstrated ability to manage financial responsibilities
* Capital - the borrower's willingness to invest their own funds as a part of the project (banks don't want to own 100% of a venture)
* Capacity - the borrower's earning history. Should a deal not go as planned, does the borrower have the ability to still service loan payments?
* Conditions - does the local economy or borrower's knowledge of their industry demonstrate a likelihood of success? Like most intelligent investors, banks also tend to manage diversified portfolios and try not have too many loans in one particular industry.
* Collateral - does the borrower have something of value to guarantee the payback of the loan?
The best way to show banks that you are worth the risk of financing is to develop a clear business plan. An effective business plan will address not only why you need money, but also that you have developed a course of action to be able to make payments on the loan. As Allen Racine said, "Cash flow makes loan payments," so any good business plan will have a detailed cash flow analysis demonstrating that you have developed a plan to keep your business operating and the ability to still make loan payments.
Quite some time ago, I referenced Robert Kiyosaki's book, "Rich Dad, Poor Dad." In this book he references a simple process for cash flow that shows investing in assets that generate income. It is this process that every borrower should keep in mind when they approach a lender for financing. Income generation and cash flow analysis must be clearly identified.
Think of the typical proceeds of financing. Maybe the borrower needs money to purchase production equipment, to purchase more inventory, to cover accounts receivable for an interim period or just to have working capital for operations.
While it seems like I am stating the obvious, that equipment, inventory, accounts receivable and operating expenses must generate a profit above the cost of financing to justify the need for that money. An effective business will not only show how the funds will be spent, but specific benefits that will be achieved from the use of those proceeds.
So if you are purchasing equipment, there should be some analysis of the productivity that will be gained from that purchase. If you need inventory, there should be some analysis of your mark-up percentage and your expected turn rate on that inventory. If you need money for accounts receivables, you should show your average days receivables, along with your profit margin on those receivables.
The most difficult financing is for working capital, as this is the most unsecured level of financing. If your businesses' income can't cover operating expenses, there should be a clear reason why, but more importantly, a detailed timeline explaining the temporary nature of this and a plan of when the profit from operations will no longer require this level of working capital. If you can't do this, borrowing money will only create more expenses, and therefore, more trouble.
There is nothing wrong with going to a bank and presenting a plan that shows that you need money. That is as long as you are prepared to show that you figured out a way to generate even more income from the use of those funds. My clients often tell me they could make more money if they had access to money. Yet telling me and showing me are to different things. For those who need money, be prepared to show a plan that quantifies how you plan to generate more profit from those funds. If you need assistance, stop by your local SBDC and we would be glad to help you in those efforts.
One of the items that we discussed included dispelling the myth that "Banks only want to lend you money when you don't need it and they don't want to lend to people who need money." This is not a new sentiment, nor does it relate to the so-called "credit crisis" of the past few years. Mark Twain is reported to have said, back in the 19th Century, "A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain."
Banks need to lend money to make money and my guess is that most commercial lenders out there would welcome an increase to their business loan portfolios. Yet at the same time, we have to remember that bankers only make money on their loans if the customer can make the loan payments.
Both bankers noted that what banks do is "manage risk." They lend, using resources from customer deposits, money their clients require today and expect to be able to pay back in the future. For the privilege of getting this money in advance, the borrower pays interest to the banks.
Of course, there are no guarantees of future performance, so the banks are assuming risk in using their assets. Bankers want to help their small business clients, but they also have a responsibility to their depositors to carefully assess risk and ensure those loans are paid back. They manage this risk by using what is often referred to as the five C's of financing:
* Character - the borrower's credit history and demonstrated ability to manage financial responsibilities
* Capital - the borrower's willingness to invest their own funds as a part of the project (banks don't want to own 100% of a venture)
* Capacity - the borrower's earning history. Should a deal not go as planned, does the borrower have the ability to still service loan payments?
* Conditions - does the local economy or borrower's knowledge of their industry demonstrate a likelihood of success? Like most intelligent investors, banks also tend to manage diversified portfolios and try not have too many loans in one particular industry.
* Collateral - does the borrower have something of value to guarantee the payback of the loan?
The best way to show banks that you are worth the risk of financing is to develop a clear business plan. An effective business plan will address not only why you need money, but also that you have developed a course of action to be able to make payments on the loan. As Allen Racine said, "Cash flow makes loan payments," so any good business plan will have a detailed cash flow analysis demonstrating that you have developed a plan to keep your business operating and the ability to still make loan payments.
Quite some time ago, I referenced Robert Kiyosaki's book, "Rich Dad, Poor Dad." In this book he references a simple process for cash flow that shows investing in assets that generate income. It is this process that every borrower should keep in mind when they approach a lender for financing. Income generation and cash flow analysis must be clearly identified.
Think of the typical proceeds of financing. Maybe the borrower needs money to purchase production equipment, to purchase more inventory, to cover accounts receivable for an interim period or just to have working capital for operations.
While it seems like I am stating the obvious, that equipment, inventory, accounts receivable and operating expenses must generate a profit above the cost of financing to justify the need for that money. An effective business will not only show how the funds will be spent, but specific benefits that will be achieved from the use of those proceeds.
So if you are purchasing equipment, there should be some analysis of the productivity that will be gained from that purchase. If you need inventory, there should be some analysis of your mark-up percentage and your expected turn rate on that inventory. If you need money for accounts receivables, you should show your average days receivables, along with your profit margin on those receivables.
The most difficult financing is for working capital, as this is the most unsecured level of financing. If your businesses' income can't cover operating expenses, there should be a clear reason why, but more importantly, a detailed timeline explaining the temporary nature of this and a plan of when the profit from operations will no longer require this level of working capital. If you can't do this, borrowing money will only create more expenses, and therefore, more trouble.
There is nothing wrong with going to a bank and presenting a plan that shows that you need money. That is as long as you are prepared to show that you figured out a way to generate even more income from the use of those funds. My clients often tell me they could make more money if they had access to money. Yet telling me and showing me are to different things. For those who need money, be prepared to show a plan that quantifies how you plan to generate more profit from those funds. If you need assistance, stop by your local SBDC and we would be glad to help you in those efforts.
Tuesday, June 15, 2010
Social Media Symphony
Today we sponsored a half day conference entitled "Demystifying Social Media." Our feature speakers included Joe Schaefer of Overit Media and SUNY Plattsburgh Communications Department Professors, Colleen Lemza & Dr. Jonathan Slater. We had 23 small business owners in attendance and some great information was shared by all.
I am by no means a social media maven and my lack of consistency posting to this site is one of the cardinal sins of blogging. Still, on occasion, I come up with a new posting and decide to share some information with my few faithful followers (thanks, Mom!) and those who happen to search the web for some business advice.
During my introduction to this event, I compared social media to a musical instrument. It is just a tool and what you get out of it is directly related to how skilled you are at using it. There are those people who use sites likes Facebook, Twitter and Linked In for fun or recreation. In their use of these social media tools, they have fun and make a lot of noise. Sometimes there is something catchy and entertaining, but more often than not, there is just noise. Sometimes, if it is out of tune, it can be downright annoying.
For small businesses who want to utilize social media as a tool to grow their revenues, they have to be careful to learn the proper techniques of using these instruments. Just using social media will not result in extra sales. Even though it can be a revolutionary marketing tool, the fundamentals of marketing remain the same.
You have to emotionally convince your potential customers that you have something that they value enough to purchase from your business. Those who effectively use social media, study the techniques to use these tools with care and continually refine their efforts to create beautiful messages that are harmonious with their customer's needs.
With social media, you are given tools to share messages about your business to the masses. If used effectively, you can create beautiful music that your customers can share with their networks of friends; sales can exponentially increase as they share your message with their friends. They may also take that extra step provide a testimonial that reinforces your message and provides instant credibility to your business. That's beautiful music.
Still, if used ineffectively, social media will not benefit your business. Social media is viral, which is good if your business message is catchy, like that #1 hit people want to hear over and over again. On the other hand, the viral nature of social media can be devastating if someone shares negative information about your business.
I don't want to scare you, the social media tools out there are fairly easy to use effectively. Some of you will be naturals at using these tools and others may need some instruction. I invite you to visit Dr. Slater's Google bookmark with some great articles on the effective use of social media.
Seth Godin, one of my favorite marketing gurus, once said, “Conversations among the members of your marketplace happen whether you like it or not. Good marketing encourages the right sort of conversations.” Like playing a musical instrument, there is an art to creating a good conversation about your business. If it doesn't come easy to you, consider working with some marketing professionals to help you craft that magic story. Then grab your social media instruments and create a symphony of success.
I am by no means a social media maven and my lack of consistency posting to this site is one of the cardinal sins of blogging. Still, on occasion, I come up with a new posting and decide to share some information with my few faithful followers (thanks, Mom!) and those who happen to search the web for some business advice.
During my introduction to this event, I compared social media to a musical instrument. It is just a tool and what you get out of it is directly related to how skilled you are at using it. There are those people who use sites likes Facebook, Twitter and Linked In for fun or recreation. In their use of these social media tools, they have fun and make a lot of noise. Sometimes there is something catchy and entertaining, but more often than not, there is just noise. Sometimes, if it is out of tune, it can be downright annoying.
For small businesses who want to utilize social media as a tool to grow their revenues, they have to be careful to learn the proper techniques of using these instruments. Just using social media will not result in extra sales. Even though it can be a revolutionary marketing tool, the fundamentals of marketing remain the same.
You have to emotionally convince your potential customers that you have something that they value enough to purchase from your business. Those who effectively use social media, study the techniques to use these tools with care and continually refine their efforts to create beautiful messages that are harmonious with their customer's needs.
With social media, you are given tools to share messages about your business to the masses. If used effectively, you can create beautiful music that your customers can share with their networks of friends; sales can exponentially increase as they share your message with their friends. They may also take that extra step provide a testimonial that reinforces your message and provides instant credibility to your business. That's beautiful music.
Still, if used ineffectively, social media will not benefit your business. Social media is viral, which is good if your business message is catchy, like that #1 hit people want to hear over and over again. On the other hand, the viral nature of social media can be devastating if someone shares negative information about your business.
I don't want to scare you, the social media tools out there are fairly easy to use effectively. Some of you will be naturals at using these tools and others may need some instruction. I invite you to visit Dr. Slater's Google bookmark with some great articles on the effective use of social media.
Seth Godin, one of my favorite marketing gurus, once said, “Conversations among the members of your marketplace happen whether you like it or not. Good marketing encourages the right sort of conversations.” Like playing a musical instrument, there is an art to creating a good conversation about your business. If it doesn't come easy to you, consider working with some marketing professionals to help you craft that magic story. Then grab your social media instruments and create a symphony of success.
Tuesday, June 8, 2010
The Numbers Tell You What, Not Why
Financial management of a small business is a challenging endeavor. For any business to succeed, cash must flow and profitability must increase at a rate that provides a reasonable return on investment. Yet the fluid nature of a business sometimes makes keeping track of performance as easy as nailing Jello to a wall.
I often remind my clients that "you have to keep score if you want to win the game." Good financial management of a business begins with keeping good financial records. Knowing what to track is the most important part of developing an effective bookkeeping system. Most businesses only have a few "key performance indicators" that will provide the vital signs for success. Reviewing these indicators on a regular basis will help assess the true health of your business.
For those who do not have a strong accounting background, I would suggest a little bit of independent study with some industry reports of financial ratios you should watch pertaining to you specific business. Ratios tend to be a good measure to compare your business against industry standards and any good financial analysis would consider measures of liquidity, profitability and return on investment. If you are not familiar with these terms, no worries, there is always time to do a little self study, talk to your accounting professional or you can visit your local SBDC.
As someone who had no accounting background before going into business for myself, I often made decisions based on intuition of performance, not the facts. It is amazing how many small business owners are guilty of making that same mistake. Sometimes, a quick review of financial performance will help you recognize that your intuition may have been wrong.
The numbers don't lie and if you are keeping good financial records, the vital signs of your business will become glaringly apparent; and for many small business owners, it is not uncommon to find these vital signs conflict with the owner's intuitive measures of performance (which is usually the checkbook balance).
I often tell my clients that checking account balances and profit & loss statements only tell a partial picture of their businesses' well being. The balance sheet is the only financial document that tells the complete story of financial performance. Because of this, I strongly suggest you maintain a bookkeeping that allows you to review a fairly accurate balance sheet on a monthly basis. By paying attention to some trends of key performance indicators on your balance sheet, you will have a better idea of the true health of your business.
At a minimum, the review should include:
Liquidity - is your cash balance in your checking account increasing? Are inventory levels and accounts receivables increasing or decreasing?
Profitability - did you have more income than expenses for this period?
Return on Investment - is the percentage of profitability divided by your assets increasing or decreasing? You may also want to measure this against just your fixed assets.
Again, there is no need to worry if you do not understand some of the financial terms and ratios being discussed. There is always time to improve your financial knowledge and I guarantee that a better understanding of finance will help you make better business decisions.
Keep in mind that the numbers will only tell you the story of what has happened to your business to date. The numbers can't tell you why your performance has improved or declined. Knowing why your business has arrived at its current financial state is always going to be a challenge. Sometimes the reasons are very apparent, but other times, it may be a combination of factors. In some cases, the causes may be mismanagement and an honest assessment of your management decisions should be part of the process.
No matter what the reasons may be for your performance to date, there is always hope for a better future. Tomorrow's balance sheet is always going to differ from today's if you are conducting business. By learning the lessons of how your business has performed to date you can develop plans to improve for the future.
Once you have honestly addressed why your business is where it is, you will be better positioned to develop plans to grow and prosper in the future. Any effective plan should have a scorecard of what you intuitively think will happen. This way you can measure success and make adjustments if things don't go as planned.
Growing a successful business is a balance of measuring performance to date and developing new possibilities for a better future. As you study your performance, don't dwell only on the results; also think about what you are going to do better in the future. As Robert Kennedy once said, “There are those who look at things the way they are, and ask why... I dream of things that never were, and ask why not?”
I often remind my clients that "you have to keep score if you want to win the game." Good financial management of a business begins with keeping good financial records. Knowing what to track is the most important part of developing an effective bookkeeping system. Most businesses only have a few "key performance indicators" that will provide the vital signs for success. Reviewing these indicators on a regular basis will help assess the true health of your business.
For those who do not have a strong accounting background, I would suggest a little bit of independent study with some industry reports of financial ratios you should watch pertaining to you specific business. Ratios tend to be a good measure to compare your business against industry standards and any good financial analysis would consider measures of liquidity, profitability and return on investment. If you are not familiar with these terms, no worries, there is always time to do a little self study, talk to your accounting professional or you can visit your local SBDC.
As someone who had no accounting background before going into business for myself, I often made decisions based on intuition of performance, not the facts. It is amazing how many small business owners are guilty of making that same mistake. Sometimes, a quick review of financial performance will help you recognize that your intuition may have been wrong.
The numbers don't lie and if you are keeping good financial records, the vital signs of your business will become glaringly apparent; and for many small business owners, it is not uncommon to find these vital signs conflict with the owner's intuitive measures of performance (which is usually the checkbook balance).
I often tell my clients that checking account balances and profit & loss statements only tell a partial picture of their businesses' well being. The balance sheet is the only financial document that tells the complete story of financial performance. Because of this, I strongly suggest you maintain a bookkeeping that allows you to review a fairly accurate balance sheet on a monthly basis. By paying attention to some trends of key performance indicators on your balance sheet, you will have a better idea of the true health of your business.
At a minimum, the review should include:
Liquidity - is your cash balance in your checking account increasing? Are inventory levels and accounts receivables increasing or decreasing?
Profitability - did you have more income than expenses for this period?
Return on Investment - is the percentage of profitability divided by your assets increasing or decreasing? You may also want to measure this against just your fixed assets.
Again, there is no need to worry if you do not understand some of the financial terms and ratios being discussed. There is always time to improve your financial knowledge and I guarantee that a better understanding of finance will help you make better business decisions.
Keep in mind that the numbers will only tell you the story of what has happened to your business to date. The numbers can't tell you why your performance has improved or declined. Knowing why your business has arrived at its current financial state is always going to be a challenge. Sometimes the reasons are very apparent, but other times, it may be a combination of factors. In some cases, the causes may be mismanagement and an honest assessment of your management decisions should be part of the process.
No matter what the reasons may be for your performance to date, there is always hope for a better future. Tomorrow's balance sheet is always going to differ from today's if you are conducting business. By learning the lessons of how your business has performed to date you can develop plans to improve for the future.
Once you have honestly addressed why your business is where it is, you will be better positioned to develop plans to grow and prosper in the future. Any effective plan should have a scorecard of what you intuitively think will happen. This way you can measure success and make adjustments if things don't go as planned.
Growing a successful business is a balance of measuring performance to date and developing new possibilities for a better future. As you study your performance, don't dwell only on the results; also think about what you are going to do better in the future. As Robert Kennedy once said, “There are those who look at things the way they are, and ask why... I dream of things that never were, and ask why not?”
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