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Six Ways to Make Your Small Business Brainstorms Better

Small Business – Compare Small+Business+Ownerthese two definitions of “brainstorming”:

Merriam Webster defines brainstorming as a group problem-solving technique that involves the spontaneous contribution of ideas from all members of the group.

By contrast, the Oxford Dictionary defines brainstorming as a moment in which one is suddenly unable to think clearly or act sensibly.

Note the difference. While brainstorming can spark innovative business ideas or solutions – that does not always happen. In some cases, a group setting can make employees feel intimated or hesitant to share their thoughts with their colleagues. In other cases, employees may view these group think tanks as boring and a waste of time.

Regardless of how you view brainstorms, here are some common reasons they fail:

The facilitator leading the session is unable to foster a positive, energetic atmosphere.
Participants spend more time trying to one-up each other than building on each other’s ideas.
The meeting organizer has not laid the (important) ground rule that criticism and negative commentary on others’ ideas should be banned.
Employees feel compelled to talk even when they do not have any contributions to make.
The person leading the meeting is intent with participants agreeing with his or her ideas rather than coming up with their own.

So how do you get a brainstorm to work? Here are some simple steps:

Prior to the session, send out an invitation stating the focus of the brainstorm, usually including more information is better so that participants can prepare in advance.
Invite a diverse group, such as a mix of junior and senior staff; people from multiple disciplines with a common concern; and, perhaps, a “wild card” – someone who can add a fresh, unbiased perspective, preferably somebody who is a lower-level employee or even an intern.
Remember that the main goal of a brainstorming session is to generate as many ideas as possible. Better yet, have the brainstorm facilitator keep the momentum going by pushing for more ideas, similar to the way an auctioneer would push for a higher bid.
Getting a large number of ideas requires that the leader keep up the pace and actively push people to share their ideas without self- or group-imposed censorship.
Don’t be afraid of occasional silence – especially when brainstorming with a smaller group. If people spend part of the meeting gathering their ideas and providing thoughtful suggestions, you may end up with more sophisticated ideas.
If you are able to choose an idea to pursue by the end of the meeting, assign someone to spearhead the effort and schedule a follow-up meeting.

In addition to what’s listed above, there are also more sophisticated approaches to brainstorming that might be useful for your small business. These include:

“Brainwriting” involves employees building on each other’s ideas. One way to implement it is to have group members write their ideas on paper and then exchange their lists with others on the team for idea expansion. Another possibility is to create a bulletin board – on a wall or online – where a basic topic is posted and participants can add suggestions and comment on each other’s posts.
Add a “what if” scenario to your problem-solving session, for example, what if a new competitor entered our market; what if we lost a key member of our leadership team; what if we no longer had our main revenue driver, etc.? Thinking this way may allow you to look at your company in a new light.
Solo brainstorming is often used in companies with a culture that encourages brainstorming on a daily basis. A person can write one idea each day on an index card and, at the end of the month, shuffle them around and combine ideas. When done right, brainstorming can be applied to any number of issues a company encounters, including – saving money, increasing profits, inventing innovative new products and services, creating marketing campaigns, retaining staff and more. However, if you want employees to continue to be enthusiastic about participating in this process, be sure that you are committed to putting some of the ideas into action. This way, they know they are making meaningful contributions to your company.

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January 23, 2012 Today's Business, , , , , , , , 0 Read more >

Should I Be a DBA or Corporation?

This show (Thursday, December 29, 2011 at 7:00 pm CST) will talk about why it is importance of structuring your business in a proper way to build creditability and begin branding your newly formed company. We will talk about were to go to get set up from the county to the state and why this structure is important. Check it out at l“>Apple Capital Group Blog Talk Radio </a>

December 29, 2011 Today's Business, , , , 0 Read more >

Start-up Dollars and Sense: Estimating Start-up Costs for Your Business

The first step in beginning a new business is to understand the cost of getting started and getting to break-even.

by Sherron Lumley.

“It’s exciting to start my own business because it’s taken me a long time to figure out what I really want to do,” says Renee Fisher, who recently launched an event-planning business in Portland, Oregon. “I used to put on parties when I was a little girl,” she says, “and I enjoyed it and people noticed I was good at it.” With background experience in organizing bridal shows, this is the moment Pull-Quote.pngshe has been waiting for. For her and for thousands of other entrepreneurs, forming a new business is one of the most exciting experiences of a lifetime.

A business needs passion, capital, and time to succeed, but deciding whether a business idea will fly starts with a hard look at start-up costs and the amount of seed money needed to keep the business going until it makes a profit (the break-even point). It could be a lot or a little, depending on the business, the funds available, and the creative abilities of the entrepreneur.

Brandon Davis, founder of Precision Rail of Oregon, tackles break-even analysis regularly. “We absolutely have to do that,” he says, noting that beyond estimating start-up costs, such analysis is also important for the ongoing success of the company. Fully immersed in the details of his business, Davis can easily recite the basic expenses of his operation: “cost of materials, cost of labor, the rent on the building and fuel cost for the vehicles.”

Write a business plan and make more money faster

The amount of time it takes to get past the break-even point and start making a profit differs for every small business. However, according to research by the Kauffman Center for Entrepreneurship, the world’s largest foundation devoted to entrepreneurship, companies with written business plans have 50 percent greater sales growth and 12 percent higher gross profit margins than companies without plans.

Even for those who aren’t spreadsheet-friendly, the task isn’t that difficult. Just write down every imaginable expenditure pertaining to the business prior to opening and for at least the first three months of operation. The U.S. Small Business Administration (SBA) advises new business owners to calculate the costs for several months up to the full first year. In fact, some businesses will not turn the corner and start making a profit until year two or three and creating a business plan will help you to discover that. In performing a break-even analysis, there are three key areas to examine: the initial start-up expenses (the buy-in), the monthly fixed expenses (the nut), and the monthly variable expenses (the burn rate).

The Buy-in: pre-operational start-up expenses

One of the ways Davis cut costs initially was by building his own website, which he estimates saved him $5,000. However, in retrospect he says there were drawbacks to that strategy. “It would be worth the expense to have a website designed by professionals who understand search engine optimization,” he says, referring to the digital specialty that focuses on making sure a business appears toward the top of the results when online searches are performed. Getting good results may require spending money on professional services, and this should be considered in factoring start-up costs.

Among essential early expenses, one of the first costs to negotiate is technology, including the purchase of computers, software, and phones. Other pre-operational start-up expenses include marketing and advertising, inventory or raw materials, insurance, and the business license. Every business needs one or more federal, state, or local license to operate, according to the SBA. (To find out all the local regulatory requirements in your area, visit the SBA’s Business Licenses and Permits Search Tool, which provides an interactive platform for learning all the federal, state, and local permits, licenses and registrations needed to run a business.) In examining all these expenses, be sure you are not overspending. In The Small Business Start-Up Kit from the legal publisher Nolo, author Peri H. Pakroo counsels budding entrepreneurs to only buy what the business really needs. (For a free online worksheet for calculating basic start-up expenses, check out The Frugal Entrepreneur.)

The Nut: ongoing fixed expenses

After calculating pre-operational costs, estimating the nut means adding together the fixed overhead expenses that do not change from month to month. Location expenses (rent or lease costs), salaries, and insurance premiums make up the bulk of this category. Regardless of how much business is done, rent does not change, employees expect regular paychecks, and insurance must be covered. Anything that is a regular reoccurring fixed expense should be included in the nut.

So, how much for rent? First be sure you have correctly identified exactly what your business needs because costs differ depending on what the space includes. Consider the cost of rent, length of the lease, quality of the space, operational limitations (such as hours of operation), zoning restrictions, storage capacity, lighting, data lines, security, access, and parking. For a retail space, the history of previous tenants and the type of neighbors are important. Factors to consider when looking for manufacturing space include the number of loading docks, shipping facilities, waste disposal costs, and proximity to suppliers and distributors. For an office-based business, the appearance, layout, privacy, meeting rooms, mail and shipping capabilities, and kitchen areas of a potential space are of greater consequence.

Salaries are another example of fixed expenses that do not change with the volume of business. If at all possible, avoid the common error of many budding entrepreneurs who neglect to pay themselves adequately. Just as insufficient cash flow can often spell the end of a small business, so too can being unable to pay your personal bills.

Finally, there is the increasingly large share of the nut taken up by insurance, most notably health insurance, which becomes more and more burdensome for small businesses every year. Other types of insurance you may need to secure for your business or its employees are dental, vision, life/disability, fire, loss/theft, business interruption, and malpractice. Make sure you carefully analyze the costs associated with each.

The Burn Rate: variable expenses

The burn rate is how much money is needed each month to meet variable expenses that change, depending on sales. Items in this category include cost of materials (inventory and/or raw materials), equipment replacement, project-based or seasonal labor, utilities, and delivery. For example, when Davis travels to meet clients or do railing installations, he burns fuel to get there. The more sales he has, the more gas he will burn. A literal example of the burn rate, this is an expense that is directly tied to sales volume.

Calculating variable expenses for a start-up requires some research to do accurately, and any expenses associated with doing so are tax deductible. Other tax deductible business start-up costs include the following from the Internal Revenue Service website:

Business analyses of potential markets, products, labor supply, transportation facilities, etc.
Advertisements for the opening of the business.
Salaries and wages for employees who are being trained and their instructors.
Travel and other necessary costs for securing prospective distributors, suppliers, or customers.
Salaries and fees for executives and consultants, or for similar professional services.

Resources

Books:

Birthing the Elephant, by Karin Abarbanel and Bruce Freeman

Business Plans Kit for Dummies, by Steven Peterson, PhD, Peter E. Jaret and Barbara Findlay Schenck

Ladies Who Launch, by Victoria Colligan and Beth Schoenfeldt

Six-Week Start-Up, by Rhonda Abrams

The Small Business Start-Up Kit, a Step-by-Step Legal Guide, by Peri H. Pakroo, J.D.

Interviews:

Renee Smith Fisher, owner

Renee Fisher Event Planning, Portland, OR

Brandon Davis, founder

Precision Rail of Oregon, Gresham, OR

Website: www.precisionrail.net

Web:

IRS.gov: “Business Startup Costs”

http://www.irs.gov/publications/p535/ch08.html#en_US_2010_publink1000208939

Kauffman Center for Entrepreneurial Leadership:

http://www.kauffman.org/section.aspx?id=entrepreneurship

Kauffman Index of Entrepreneurial Activity:

http://www.kauffman.org/research-and-policy/kiea-interactive.aspx

SBA.gov: “Business Licenses and Permits Search Tool”

http://www.sba.gov/content/search-business-licenses-and-permits

SBA.gov: “Estimating Startup Costs”

http://www.sba.gov/content/estimating-startup-costs

SBA.gov: “Writing a Business Plan”

http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writing-business-plan

The Frugal Entrepreneur, Free Business Forms and Templates:

http://frugalentrepreneur.com/free-business-forms-templates/

November 18, 2011 Today's Business, , , , , , 5 Read more >

Small Business Marketing: Should you conduct webinars?

by Robert Lerose.

Webinars, or online presentations, are a cost-effective way to generate revenue, build brands, demonstrate products and services, provide leads, and position your company as the authoritative source that customers turn to first. “A lot of [my clients] see 70-percent or 80-percent return on investment and sometimes more,” says Leslie Davidson of Davidson Direct, a longtime consultant and provider of webinars and audio conferences.

Prices for setting up and executing webinars vary. Even though it might seem counter-intuitive, many businesses can come out ahead by outsourcing the operation instead of managing the process internally. For example, Davidson gives a price break for volume contracts that can make it more worthwhile for budget-conscious businesses.

Before putting on a webinar, Davidson recommends the following:

Select a timely topic. The best topics are those where there’s a new law or regulation from the government that your customers need to know about and apply to their businesses. “So-called nice-to-have topics work well, too, as long as they’re something of interest to your readers.” Davidson cites “Cybersecurity Best Practices: Reducing Risk Across Your Enterprise” for IT departments as a recent example of this type of topic.

Find speakers who really understand the topic and are appropriate. “If you don’t have anyone [on staff] who has contacts in a particular industry, start with an Internet search.”

Market your webinar with a good email list. If you don’t have an email list, Davidson recommends partnering with associations that have members who would be interested in your topic in exchange for a member discount. “You can add [these names] to your list and use them going forward.”

Earn money with sponsored events. If you offer the webinar for free, try to get someone else to sponsor it. After the session, follow up with a phone call to try to sell your product.

Send a lot of emails in a short time. “Webinars and audio conferences are impulse buys,” Davidson says. “You’re going to get 30 percent to 50 percent of people signing up in the last week before the event. I usually start three weeks out, sending one email a week, followed by two to three emails in the days leading up to the webinar.”

Offer combo deals for extra revenue. Selling the webinar as a CD or DVD can usually add another $50 to $100 to the original sale. Webinars can also be used as premiums in other promotions or sold as audio downloads.

Follow up with a survey. “[On my survey, I’ll ask them to] give me the names and email addresses of everybody in the room,” Davidson says. “I’ll send them a free transcript or another incentive. It helps me build my email lists and also find out what people are interested in seeing in the future.”

Outside speakers boost a company’s credibility

Business Valuation Resources (BVR), a provider of products and services to the business valuation profession, puts on about three webinars a month. On average, they get 100 people for their paid webinars and between 300 and 400 for their free sessions.

“Within the first 90 days of a free webinar, we’ll convert about 5 percent of them to paying customers, which is really good for us in this market,” says Lucretia Lyons, president of BVR. Free events have helped sell their immense product portfolio—from guides and sourcebooks to searchable databases—with an average sale of about $1,500. Some of their webinars soft-pedal a particular product, while others could feature many products related to the webinar’s theme.

Maintaining relationships with the thought leaders in their profession has been key to finding good speakers. BVR will get an outside expert to present on their products or services. Then, the names of those who registered for the webinar are turned over to BVR’s internal sales force.

“We’ll tap into a short list of experts for the webinar,” Lyons says. “We don’t want to make it a 100-percent pure sales play. Our market is savvy enough to know that, of course, we’re marketing a new product. But they also have enough trust in us that they know they’re getting one of their peers to give their take on this new product.”

BVR has been experimenting with webinar pricing, dropping it from $249 to $139 for a 100-minute session in an effort to go for larger volume. They’ve also had success with series-driven programming for topics with recurring content, which has led to a steady stream of revenue. One of their fastest-growing products gives unlimited access to all of their webinars for only $995.

Customized webinars generate revenue

Business owners are also using webinars to provide value-added services for their existing clients. Du-All, an environmental health and safety-consulting firm, tailored a training program to meet one client’s specific needs.

“We might do a one-hour or two-hour webinar on warehouse safety hazards. If we have a national client, we can reach all their locations and provide some kind of remote training,” says Joe Moulton, manager of environmental services. A one-hour class might cost $450 to $650 depending on the number of attendees.

Du-All has just started rolling out with a second webinar series to generate new clients and new revenue. These webinars inform decision makers about new rules coming out and how to comply with them—and then pitch Du-All’s services at the conclusion as one way to comply.

The webinars are free and last no longer than 30 minutes. Subject matter specialists host them, followed by a short sales pitch at the very end.

Low overhead, the ability to reach a large audience and increased revenue make webinars well within the reach of almost every business owner. Or, as BVR’s Lyons says, “Webinars offer the chance to really showcase your company in sort of a three-dimensional way and get people from a distance on board.”

September 19, 2011 Today's Business, , , , , , , , , 14 Read more >

Six ways a small business can leverage its customers

By Reed Richardson

By necessity, most small business owners quickly become creative problem-solvers, finding unorthodox means of survival and alternative pathways to success. After all, almost all entrepreneurs launch their businesses with a shortage of funds and a lack of support staff, meaning that they must not only figure out how to build that better mousetrap, but also produce it on a shoestring budget and then advertise and sell it using low or no-cost marketing tactics.

But for all their resourcefulness, there is one potentially powerful asset that small businesses all too often overlook or underestimate; it’s the same one that fills their cash register everyday—their customer. So, if you think that your small business’ current customers are only good for occasionally buying your products or services, it’s time to readjust your expectations and start leveraging their value for greater prosperity and growth.

1.  Turn them into sales prospectors for your business

Those satisfied customers going in and out of your front door everyday—or clicking to and then away from your website—could be some of your best salespeople, if only you would ask them. But far too many businesses simply forget or intentionally avoid systematically asking for customer referrals. Even the simple, passive act of putting up a sign in your office or on your website that says, “If you like our widgets, please tell a friend!” rarely occurs at most small businesses.

During research on this topic for his recent book, The Referral Engine, author and “Duct Tape Marketing” guru John Jantsch conducted an informal survey of thousands of small businesses. From his results, he found that more than 63 percent of the small companies he surveyed received a majority of their business from referrals, yet nearly 80 percent of those same businesses acknowledged that they had no system in place to consistently generate such referrals. “If you don’t feel strongly enough about the value you or your products deliver to expect that your clients will voluntarily make an effort to see that others receive it,” Jantsch writes in his book, then it’s time to “get to work on creating a brilliant system that’s focused on getting results for your customers.” Doing so might be the difference between getting or losing a majority of your future business.

 

2.  Enlist them into your advertising and marketing plan

With the advent of social media, the playing field has significantly leveled when it comes to extending a small business’ brand. Encouraging happy customers to “like” your business on Facebook or re-tweet product offers and updates you post on Twitter means you can unleash a digital army of marketers for little or no money. But it does require time and careful effort to build these relationships properly. A dormant Facebook wall or, conversely, a constant barrage of unengaging Twitter posts will quickly burn up any word-of-mouth goodwill between you and your customers.

Investing in and fostering these fans of your business eventually pays dividends, according to this recent survey by social media consultant Syncapse. Its results estimated that the average annualized value of a Facebook fan to a business was roughly $138 and that each fan spends an additional $72 on products they “like” online versus those they don’t. What’s more, the Syncapse study found Facebook fans are 28% more likely than non-fans to stick with a brand and also 41% more likely to recommend that brand’s products to others. That’s a powerful way to extend your reach and feed the referral engine.

 

3.  Tap their knowledge of your business as a source of innovation and R & D

Entrepreneurs, so focused on rolling out their new product or their latest service, routinely fail to take into account the input of the end user—the customer. But by seeking out your customer’s advice and suggestions—before, during, and after a rollout—a small business owner can often avoid a disastrous product launch, refine their existing platforms, and add successful new companion services to their offerings.

 

Indeed, it pays to think of your existing customers as kind of a never-ending focus group. You may think you know why your customers are purchasing, but unless you ask them you may never know the real reasons. By distributing a steady stream of customer surveys—whether it’s in person, by mail, or online—you can arm your business with a rich database of information about everything from sales frequency to price points to marketing effectiveness to packaging and shipping preferences. Even if you find out that you do have an accurate read on why your customers like your current products or services, it’s worth taking the extra step to find out what else they might like or want to see you provide them. And once you do, be willing to enlist your loyal customers’ help in trying out, or beta testing, these new offerings before you execute a full launch. Such a gesture will convey the trust you have in them and will further cement their loyalty to your company, while, at the same time, your business will reap the real-life, unbiased opinions of the marketplace, making your new endeavor more profitable.

 

4.   Transform them into a vendor or subcontractor of your business by discovering what mutually beneficial talents they possess

Stare at a financial spreadsheet for too long and it’s easy to start viewing your business’s customers as little more than lines on a graph or numbers in a table. That one-dimensional approach fails to consider the talents or skills that your customers possess, talents and skills that just may benefit your business, if only you knew about them. So if your retail business is looking for permanent back-office help like, say, an accountant to do your books, or even someone to handle a temporary project, like a freelance graphic artist to design new promotional materials for your business, it’s a good idea to put out the word to your customers first, both in your store and on Facebook. While you probably won’t find an exact match each and every time, you’re still likely to get at least a few good references.

Mining your existing customers for vendor or subcontractor help has an additional benefit—it opens up the possibility of bartering for those products or services, an old-fashioned business tactic that is making a comeback in an era of near universal belt-tightening. Most of the more popular small business barter exchanges, like ITEX, BarterQuest, and NuBarter work by matching up pairs of entrepreneurs and other businesses or individuals, based on correlating wants and offerings. Because these barter exchanges involve larger networks, they have the advantage of offering a more expansive menu of products or services available for barter. However, thanks to their larger size, they almost always match up barter partners that are unfamiliar with one another and, therefore, some risk is involved in the process, even if the exchanges are careful to put policies in place to mitigate that. But bartering with your customers means dealing with someone with whom your small business already has an established relationship, making questions about reliability much less of a concern.

 

5.   Provide more ways for them to pay for what you offer

Small businesses looking for better ways to turn their current customers into greater cash flow should think beyond getting paid at the point of purchase. Instead, develop creative ways to bring in revenue more consistently, through mechanisms like subscriptions, automatic bill pay, and even layaway.

 

“The last 10 years have seen a dramatic increase in companies using the subscription model to offer everything from music, movies, and textbooks to even cars for a monthly fee,” explained Tien Tzuo in a VentureBeat column last summer. Tzuo, CEO of the online billing company Zuora, points to the recent rollout of Apple’s iPhone 3G as an example of why savvy subscription pricing beats one-shot-sales thinking in the long run. “When the iPhone 3G was introduced, AT&T dropped the price of the iPhone by $100 and simultaneously raised monthly fees by $10. In doing so, they were able to sell more iPhones (lower entry fee) but earn more money over the life of the two-year contract.”

 

By building up your customer’s paying “habits,” you’re also building up their loyalty to your business and making it less likely they will stop buying altogether or move on to a competitor. And by linking automatic bill pay capability to a subscription model, you’re less likely to deal with late or missed payments, meaning your business can enjoy greater consistency in terms of cash flow. If your business sells big-ticket items that aren’t a good fit for a subscription model, help your customers avoid dealing with missed or late payments on their credit cards by offering them a layaway plan. Layaway, which is also experiencing a resurgence in the marketplace, gives your business a few weeks or months of steady revenue while turning one big sale into a series of smaller transactions. Here again, your business is getting paid outside the point of final sale, but is also making it increasingly comfortable for a customer to think of him or herself as a repeat customer.

 

6.  Convert them from mere customers to trusted employees

Just as when you invited your customers to work with your business as a vendor or freelancer, don’t overlook asking them to work for your business when you need to hire more staff. Loyal customers make for a great initial pool of job candidates for several reasons: They’re familiar with your products or services, they likely know your staff if not you as well, and they already like what you do enough to spend their money with your business. That you won’t have to engage in a lengthy and expensive job search is yet another advantage to hiring from your customers.

 

Of course, simply hanging a “Help Wanted” sign above your cash register or on your front door is a good start to this process, but don’t forget to post the same sign on your business’s online doorways, like your company website and Facebook page. Why? Because those online friends of your business aren’t just interested in your next product launch or discount offer; increasingly they are looking at your company’s social media sites for news about hiring. In fact, according to this CareerBuilder survey from last August, an online job posting is now the No. 1 thing—cited by 35 percent of respondents—someone visiting your business’s social media site wants to see. That kind of interest can turn a valued customer into an even more precious commodity—a good employee.

September 13, 2011 Today's Business, , , , , , , , , 6 Read more >

Seven Ways to Find the Right Mentor

Whether you’re a start-up or you have been in business for a while, chances are issues will arise that you have not encountered before. You may be looking to hire a strategic partner for the first time; you may be interested in launching a social networking campaign; or you may be seeking to expand your business by tapping into a new market.

Instead of taking extensive time to research these issues on your own (or opting to plow ahead and hope for the best), you might want to consider forming a relationship with a business mentor. Sometimes the process of finding a mentor happens naturally, (i.e. someone you know socially turns out to be an expert on the business issue you’re facing). Most of the time, however, it takes a concerted effort.

The following are seven tips small business owners should remember when looking for a business mentor.

1. Narrow down the list of issues with which you need help. Prioritize your most pressing challenges so you can get the most out of a mentor relationship. You may even determine you need more than one mentor. Asking for too much information at once can overwhelm even the most generous person.

2. Pinpoint the personal qualities you think you’d respond to in a mentor. Before refining your list of potential mentors, do some soul searching and see if you can answer questions like these:

Are you interested in someone who is a good listener and doesn’t offer feedback until he or she mulls over your question?
Do you prefer people who tell you everything they know on a subject?
Is responsiveness important to you – do you want hands-on guidance in real time?
Would you prefer verbal feedback on your planned courses of action?

3. Define the parameters of the relationship. The ideal mentor relationship for you might involve someone with whom you can speak briefly every time you have questions. Or perhaps a monthly dinner meeting would be a more productive forum for addressing ongoing issues. Over time, you might discover that your mentor is interested in joining your company as a senior executive or even a CEO if you reach a certain point of growth.

4. Spread the word as far as you can. Reach out to your email list; contacts on LinkedIn and other social networks; friends and colleagues and attendees at networking events, conferences and trade shows. Don’t rule out total strangers. If you read an interview with a like-minded business owner in a trade or business magazine, feel free to send him or her a follow-up note. As long as there is no direct issue of competition, most small business owners are happy to help a fellow entrepreneur, and might even see potential for collaborating in other ways in the future.

5. Do not overlook larger resources. The Small Business Administration, SCORE, local chambers of commerce and private mentoring businesses have wide-ranging mentoring programs that offer long-term mentoring and assistance with advisory board formation. These resources may prove to be a valuable way to connect with potential mentors.

6. Formalize the selection process. Similar to personal relationships, it’s probably best not to rush things. Start out getting to know the potential mentor, get a sense of whether they’d be open to the idea and simply ask to pick their brain on a few issues. Discuss where and how often you will meet, what you can offer to the relationship, and long- and short-term goals.

7. Remember that mentoring is a two-way street. Don’t forget to thank your mentor regularly for advice that led to good results for your business. Further, periodic feedback is a good way to keep your mentor invested in your businesses success.

Since mentors can be from different industries, or even different geographical locations, it should be relatively easy to find someone. It’s certainly less risky and time consuming than using trial and error or relying solely on your own perspective and experience. And, once you experience a positive mentoring relationship, you might look forward to the day when you can become a mentor yourself. Have you found a mentor that has helped make a difference in your business? Share your thoughts with the Apple Capital Group team in the comments section.

Whether you’re a start-up or you have been in business for a while, chances are issues will arise that you have not encountered before. You may be looking to hire a strategic partner for the first time; you may be interested in launching a social networking campaign; or you may be seeking to expand your business by tapping into a new market.

Instead of taking extensive time to research these issues on your own (or opting to plow ahead and hope for the best), you might want to consider forming a relationship with a business mentor. Sometimes the process of finding a mentor happens naturally, (i.e. someone you know socially turns out to be an expert on the business issue you’re facing). Most of the time, however, it takes a concerted effort.

The following are seven tips small business owners should remember when looking for a business mentor.

1. Narrow down the list of issues with which you need help. Prioritize your most pressing challenges so you can get the most out of a mentor relationship. You may even determine you need more than one mentor. Asking for too much information at once can overwhelm even the most generous person.

2. Pinpoint the personal qualities you think you’d respond to in a mentor. Before refining your list of potential mentors, do some soul searching and see if you can answer questions like these:

Are you interested in someone who is a good listener and doesn’t offer feedback until he or she mulls over your question?
Do you prefer people who tell you everything they know on a subject?
Is responsiveness important to you – do you want hands-on guidance in real time?
Would you prefer verbal feedback on your planned courses of action?

3. Define the parameters of the relationship. The ideal mentor relationship for you might involve someone with whom you can speak briefly every time you have questions. Or perhaps a monthly dinner meeting would be a more productive forum for addressing ongoing issues. Over time, you might discover that your mentor is interested in joining your company as a senior executive or even a CEO if you reach a certain point of growth.

4. Spread the word as far as you can. Reach out to your email list; contacts on LinkedIn and other social networks; friends and colleagues and attendees at networking events, conferences and trade shows. Don’t rule out total strangers. If you read an interview with a like-minded business owner in a trade or business magazine, feel free to send him or her a follow-up note. As long as there is no direct issue of competition, most small business owners are happy to help a fellow entrepreneur, and might even see potential for collaborating in other ways in the future.

mentor quote.png5. Do not overlook larger resources. The Small Business Administration, SCORE, local chambers of commerce and private mentoring businesses have wide-ranging mentoring programs that offer long-term mentoring and assistance with advisory board formation. These resources may prove to be a valuable way to connect with potential mentors.

6. Formalize the selection process. Similar to personal relationships, it’s probably best not to rush things. Start out getting to know the potential mentor, get a sense of whether they’d be open to the idea and simply ask to pick their brain on a few issues. Discuss where and how often you will meet, what you can offer to the relationship, and long- and short-term goals.

7. Remember that mentoring is a two-way street. Don’t forget to thank your mentor regularly for advice that led to good results for your business. Further, periodic feedback is a good way to keep your mentor invested in your businesses success.

Since mentors can be from different industries, or even different geographical locations, it should be relatively easy to find someone. It’s certainly less risky and time consuming than using trial and error or relying solely on your own perspective and experience. And, once you experience a positive mentoring relationship, you might look forward to the day when you can become a mentor yourself. Have you found a mentor that has helped make a difference in your business?

September 12, 2011 Today's Business, , , , , , , , , , 9 Read more >

From the Ashes: Is resurrecting a failed or struggling small business a good idea?

By Reed Richardson

It’s a tempting premise: rather than suffer through building a new business from the ground up, why not scoop up an existing one that’s struggling and turn it around? For prospective entrepreneurs long on ideas and short on patience, this strategy has long held a certain appeal. But is jump-starting a career in small business ownership, especially in the current economic climate, really as easy as buying someone else’s failure and turning it into a success?

To be sure, buying a struggling business often has some distinct advantages, explains Stephen I. Butler, who owns his own financial and business brokerage firm, Butler Bank Consulting. Thanks to common features such as readymade staff, turnkey inventory and infrastructure, and an established customer base, acquiring an existing business can be an effective way to end run the sometimes laborious start-up process. Still, Butler says it’s worth pointing out that what is really being sold is someone else’s problems.

Diamonds in the rough are hard to find

At any one time, roughly 10 percent of the country’s six million small businesses are in the process of being closed, sold, or transferred, according to a 2011 “State of Small Business Report.” While that translates into well over half a million small businesses undergoing some kind of transition, the active marketplace for small businesses being bought and sold is actually far less than that. (The two major online business-for-sale marketplaces, BizBuySell and BizQuest, claim just less than 100,000 combined active listings for companies of all sizes.) And of those, only a small minority will be businesses in distress or in the process of closing.

However, after witnessing the glut of undervalued real estate properties now available, many budding small business owners may think there are similar diamonds in the rough to be had in the business market. But Marc Gudema, a business broker from outside of Boston, says the analogy just doesn’t hold. “What I hear a lot from prospective buyers is, ‘I just want a decent business at a really cheap price,’” Gudema explains. “But I have to tell them those kinds of great deals are all gone.”

In fact, a recent BizBuySell Insight report from earlier this spring suggests that the business market bottomed out over a year ago and is now slowly rebounding. “It is evident from the increasing median cash flow and median revenue of closed transactions that small businesses are showing stronger financials coming out of the recession,” the report concluded. “Therefore, there will likely be an influx of businesses on the market from owners who were hesitant to sell until their business performance strengthened.”
Buying a business is complicated; consider hiring a guide

The prospect of an even larger marketplace that, simultaneously, features fewer good turnaround candidates makes navigating the business-for-sale waters even trickier. So, to avoid getting swept up into an unwise or even shady deal, prospective buyers might want to strongly consider hiring a professional to help them chart the waters.

Real estate agents and CPAs are sometimes used to broker small business deals when the transactions are heavily real estate or location dependent, such as the sales of gas stations or restaurants. But selling businesses is not what they do for a living every day, notes Steve Wain, who runs the New Jersey-based business brokerage firm Calder Associates. “Business brokers, on the other hand, have to be educated in transition law, insurance, due diligence, and financial lending,” he says. “But if they’re not certified by the International Business Brokers Association (IBBA), you really don’t know who you’re dealing with.”

In about three out of every four brokered business sales the broker is hired by and paid by the seller rather than the buyer. Still, seller-hired brokers often give free advice to prospective buyers on things like compiling their financial portfolio and drafting a proper offer sheet. The process of matching a buyer with a business being sold typically takes anywhere from six months to a whole year, depending on the size, type, and complexity of the company and its assets. Although sales of failed or distressed companies sometimes can be executed much more quickly than that, there’s no guarantee, since the financial and logistical problems commonly plaguing a struggling business may take months to thoroughly untangle.

As a result of this complexity, standard business broker fees usually range from 10 to 15 percent of the cash portion of the deal. “Anything significantly above that, you should run for the hills, no matter what kind of promises they’re making,” Wain cautions. He also emphasizes that the cash price—and therefore the brokerage fee—is commonly much less than the total amount the business is sold for, since that latter figure often includes loans and other types of long-term payout compensation. “And if it’s a fairly straightforward deal for a fairly small business,” Wain adds, “it’s possible to negotiate a flat fee instead.”

“It’s not like you’re going to Home Depot to pick out a company”

“Almost 90 percent of the time, buyers first come to us saying, ‘I want a business that will bring in x amount of income a month,” Wain explains. “That’s a dangerous attitude, because it’s not like you’re going to Home Depot to pick out a company.” Wain says most reputable brokers will regularly turn away these entrepreneurial-curious types, because they’re simply looking to collect an easy paycheck rather than put in the hard work necessary to revive a business that’s currently on life support.

Many of these merely curious potential buyers do have the sufficient means to buy a company, notes central New Jersey-based business broker Rick Fulton, but they are often underqualified and overconfident, a deadly combination. (A common source of first-time buyer funding these days is a cashed-in 401(k) from a former job, he says.) “I’d say 100 out of 100 times, the buyer of a failed or distressed business thinks they can do better than the seller,” Fulton says. “But 90 out of those 100 will never make it.”

There’s a reason, in other words, that every town seems to have at least one storefront or restaurant spot that is always either “under new management” or “going out of business” and it likely isn’t the owner’s fault. Fulton too, has encountered the same business site being pitched to him for sales help multiple times, as different entrepreneurs cycle through what is an inherently flawed business model or location. “They fall in love with it and overlook the realities, and then they’re surprised when they’re out of business within a year.”

The key to staying emotionally detached during a business transaction, most brokers say, involves due diligence. Steven Butler always tells his buyer clients to get as much information as possible about the business and then get a second opinion. “Get a look at three years of past balance sheets, if possible, as well as any audits by accountants, past tax returns, and reports dealing with the business’s accounts receivable. Then, take all that data and have it analyzed by someone with relative expertise in finances.” (For a more complete list of disclosure documents a buyer should see before purchasing, see the sidebar.)

But don’t stop there, Butler says. It’s also important to take a hard look at the struggling company’s reputation as well. Why? “Because many times, distressed or failed companies have burned all their bridges of good will with their customers, suppliers, and financiers, by failing to deliver on their promises, pay for inventories, or make loan payments,” he explains. And despite the presence of new ownership, this past behavior can often haunt an ongoing business undergoing a turnaround, forcing it into onerous circumstances, like operating by C.O.D. payment or having to seek out entirely new sources of capital.

Starting over vs. starting fresh

Though fast-forwarding into entrepreneurship may be the primary driver behind purchasing a distressed business, it’s nonetheless important to take things slow both before and after the purchase. Not taking the time to understand what makes the business tick, many experts say, is a common mistake first-time business buyers make. And for someone buying a distressed business, in particular, it’s imperative to find out what once made the company successful and what has since changed to make it fail.

“I call it figuring out the ‘secret sauce’ and every business has it,” Wain says. Even if a prospective buyer has all the financial data and has talked with the sellers extensively, there’s still no substitute for actually experiencing how the company runs on a day-to-day basis, he says. “It’s like trying to explain to someone else how to ride a bicycle, they just can’t understand it until they do it themselves. That’s why I tell all buyers to check their egos at the door.”

As a cautionary tale, Wain cites a recent business transaction in central New Jersey where a buyer bought an established Italian restaurant and, within six months of purchasing it, changed its menu and theme to that of a Japanese restaurant. Soon after, the business began struggling and ultimately failed. “You have to remember you’re not only buying the assets, you’re buying the customer’s goodwill too,” he says. “In that case, the new owner didn’t grasp that, and he squandered that goodwill with an unexpected change.”

According to many business brokers, the most successful buyers of businesses—distressed or otherwise—are people who currently own another business or have experience running a business in the past. First-time buyers, they say, usually have a difficult time learning how to both run a business and resurrect someone else’s business at the same time. That’s why Butler often advises first-timers to take a hard look at the advantages and disadvantages of buying versus starting fresh. “In the end, I usually advise potential buyers that it’s probably better to start from scratch than to try and buy an existing firm, especially one that’s failing.”

And although it might sound obvious, if a buyer considering the purchase of a struggling business can’t find any track record of success at all, there’s really no point in worrying about the “secret sauce” or future customer goodwill because neither are likely to exist. “Don’t bother buying a business that was never successful,” Wain says bluntly, “you’d be better off just starting your own business.”

September 6, 2011 Today's Business, , , , , 5 Read more >

Website Essentials for Small Businesses

Whether you think of it as a virtual storefront, an online brochure, an information resource or an e-store, a website has become a necessity for most small businesses. If you already have one, are considering creating a new one or building one from scratch, the following are some tips to make your website successful.

Defining your online presence

First, define the purpose of your website, because this will dictate the type of site you have, as well as the content and functionalities it should include. Are you selling products online? Are you seeking to replicate your bricks-and-mortar presence? Do you want to raise your profile as an industry expert by blogging on issues that interest customers? Will your site serve as a database of related resources?

To DIY or not to DIY

Once you determine what type of site you want, the next big question is whether the technical requirements of your site are within your capabilities. You may need to hire a website designer or even an interactive advertising firm. Designing your own site using platforms like Go Daddy or WordPress can cost as little as $250, but can take 30-40 hours depending on your skill level and will require at least a basic understanding of html. If your site will be content heavy and require regular updates, using a content management system such as Drupal or Expression Engine will enable employees to post new content regularly and easily.

Alternatively, if you hire a designer, you can look to pay anywhere from $1,000 to $50,000, but will most likely have a more professional-looking company logo; a sophisticated design; a multi-layered site architecture; the inclusion of html-, Java- and Flash-based features; advice on domain names; site maintenance; guidance on search engine optimization and more. Unless you’re working with a full-service agency, you may need to hire a separate programmer for custom components such as online forms, e-commerce capabilities and customer relationship management tools (expect to spend approximately $85 to $125 an hour; if you decide to use Flash, the cost may be 25 to 50 percent higher.)

Finding a host with the most

Where your website resides on the Internet is key. Before getting references, narrow down your list of hosting companies by considering which capabilities are most important to you, (e.g. responsive customer service; 24/7 technical support; reliability of email system; Internet security; scalability, etc.). You should expect hosting fees to range from around $8 to $50 per month for a shared host; $25 to $250 per month for a merchant plan, and $125 to more than $1,000 per month for a dedicated server. Another option is “cloud hosting,” which is a newer, faster type of hosting that allows websites to be housed on an online infrastructure of servers.

Website visitors.pngSelecting a domain name

This applies only to small businesses that don’t already have a website. In choosing a domain name, it’s important to stay as close to the name of your business as possible. If the name is too difficult to remember, or includes numbers, dashes, acronyms or abbreviations, you may drive customers away. If someone already owns the domain name you want to use, it’s usually better to opt for a shorter version rather than a longer. In fact, 63 characters or fewer is often recommended. Unless you’re a non-profit or a university, “dot com” is still the preferred suffix for your domain name.

Additional considerations

The following are the major components small businesses should keep in mind about their website.

To increase customer trust, include a physical address and a list of major company executives with a brief biography and photograph.
If your site includes e-commerce, consider carefully whether it will be off-putting to ask customers to register their personal information before making a purchase.
If your site is primarily an e-commerce site, it may be a good idea to use a third-party vendor to design your shopping cart and payment options.
Evaluate whether bells and whistles (e.g. video and music) are necessary to enhance the user experience, or whether they will delay load times unnecessarily. However, using images to break up the text is almost always a good idea.

As a small business owner, you wouldn’t go to a meeting without a business card. Or, expect customers to commit to long-term relationships with your company without the details of what you sell. Neither would you subject them to long-waiting times in your physical location. Customers and prospects who visit your website will expect the same type of treatment they receive in person. Your website may be the only association a person has with your company – make sure that it’s a good one.

Apple Capital Group, Inc.
www.applecapitalgroup.com

August 31, 2011 Today's Business, , , 41 Read more >