Senate backs small business lending fund

I saw an article in the New York Times this morning that the senate has resurrected the small business lending fund. They've added $30B to a bill to encourage banks to lend to small business. While $30B pales in comparison to the size of the large bank and auto bailouts, it's a least a start. What troubles me is even though 80% of new jobs in the U.S. are created by small business they had to break a filibuster to get it into the bill. It kind of makes you wonder what our representatives are looking at when they spend our money.

Read the full article here.

http://boss.blogs.nytimes.com/2010/07/23/senate-backs-small-business-lending-fund/?partner=rss&emc=rss

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Top ten mistakes small business owners make

I’ve been a business owner, a mid-sized business CEO, and now I’m a business coach. I’ve had thirty-five years experience in my own businesses and with those of clients. I have recognized patterns regarding the top mistakes business owners and CEO’s make. It actually inspired me to write a book a year or so ago.

Here is my top 10 list in no particular order of frequency.

1. Failure to plan. Of the businesses I’ve seen over the past 35 years that are experiencing problems , the vast majority don’t have a documented plan. If you don’t have a plan, and documented goals what is the baseline for making decisions? The answer is, of course, there isn’t any and they spend time and money chasing diversions that look good at the time. Create a vision, communicate it, and base decisions on whether it takes you closer or further from where you want to end up.
2. Lack of financial skills. I don’t mean the ability to read an earnings statement or a balance sheet, but the skills to analyze the numbers and understand what the trends are. It’s amazing to me how little top managers understand about what their numbers are telling them. Numbers are nothing more than a scorecard, you need to look at trends and averages to understand performance. If you look at the score of a baseball game what does it tell you? Your team won or lost. The real data is in the box scores and statistics over the season.
3. Lack of execution, another word for procrastination. If it’s important get it done, make a decision, do the hard ones first. Someone once told me “bad news doesn’t get better with age”.
4. Lack of accountability for themselves and employees. I call this the “they” factor. “They” don’t care, don’t get it. Don’t produce whatever. Top management too often fails to realize that they are responsible for “they”.
5. Failure to deal decisively with the obvious. I am still amazed how long some top managers will continue to do the same things with the same results and not recognize that they need to do something different. Humans tend to ignore the unpleasant. Unfortunately it doesn’t change the facts. As Einstein said, the definition of insanity is “doing the same thing over and over and expecting different results”.
6. Lack of data. Many companies use the P & L as their only data to manage their company. They don’t have a dashboard of key metrics to analyze trends and identify root causes of problems as well as opportunities. When you see it on the P & L it’s too late, it’s already happened.
7. No clear USP. A business owner or CEO should be able to clearly articulate the answer to one simple question, “With all the goods and services available to my customer, why should they buy from me”?
8. Poor marketing and branding. Many don’t understand clearly the roles of marketing and sales. Marketing is education. Helping your customer understand why your product or service is the best value for them. Sales is facilitation, helping them purchase your product or service quickly painlessly and efficiently.
9. Insufficient capital. From startups to existing businesses this is nearly always a problem. Things always take longer, cost more, and are more difficult than our optimistic projections. Some of this is driven by the fact that if you deliver pessimistic projections you don’t get the funding you need, but inflating results just delays the inevitable. You have to go back to the well and it’s always more expensive the second time.

10. Underestimate the commitment. Many top managers and owners come from large companies with extensive support functions. Moving to a small business is an eye opener. More often than not you are the support staff. Hours, stress, risk all should be clearly understood and agreed upon by all stakeholders.

Running an organization as an owner or CEO is something that few of us ever get to do, it can be exhilarating, it can also be very stressful and risky. The key is knowing and admitting what you don’t know and getting help from trusted experts before you need it.

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Is Apple’s response to I phone 4 Issues hurting marketing effectiveness?

I have to admit; I’m an Apple convert. I bought a MacBook Pro three years ago after my second PC crash lost another load of work in progress. I also own an IPhone 3.

I was even tempted to buy an IPad when they were announced.

I visited an Apple store near Memphis to take a look. I hadn’t been in an Apple retail center in a few years and was amazed at the number of people in the place. This was a weekday, mid-week and the place was jammed with prospective customers.

My point is Apple clearly has a line of products people want and remain loyal to. Why are they taking such a defensive stance on the Iphone 4 reception problem?

I read an article in Bloomberg about Steve Job’s naming competitors phones with similar problems, which those companies denied. (read article here) 

Is it really the best strategy to dance round an issue by telling your customers that your phone works as good or bad as other phones?

Customer and brand loyalty is something to be appreciated and cultivated. Apple clearly has it for many of their products. They need to learn the old adage that it’s best to address a problem head on and not try to deflect it somewhere else. Whether Apple and Mr. Jobs believes they have a technical issue or not is immaterial at this point. Their customer base and the market perceives that they do, and addressing it head on is the only way to insure better marketing results.

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Is there a best practice for strategic planning?

I’ve done a lot of research into the subject of strategic planning. There are many theories about what is the best way to develop a plan. There is the “basic” method, scenario planning, organic planning, and bottom up planning, among others. There are even software programs to “self develop” your strategic plan.

So what is the best practice?

After studying the subject and developing literally hundreds of plans both for my businesses and client organizations I think I can say it doesn’t matter what method you use as long as you follow a basic roadmap and think it through.

As I said in my writings you need to start at the end. You need to agree upon a vision for the organization. Any journey begins with an end in mind. You simply have to determine where it is you want to go in the next three to five years. This is a key first step that many if not most organizations don’t do. I’ve heard things like if we decide on a specific direction we might miss opportunities in another direction.

My response to that is if you don’t decide on a general vision, you waste time, energy and capital resources chasing tempting diversions that may of may not fit. Scenario planning mentioned above can be used as a supplement to a plan, but overall you need to decide what your organization will look like in the future. You may plan for various market or competitive influences but only to the degree of how they may impact your overall vision.

After deciding where it is you’re going you need to clearly understand where you are now. A thorough S.L.O.T. analysis looking at internal strengths and limitations as well as external threats and opportunities is essential for step three. You wouldn’t begin a road trip without knowing where you want to go and then developing a solid beginning point, why is a roadmap for your organization any different?

Step three is clear, crisp, timed, goals designed to get you from where you are to attainment of your vision.

Having a clear vision makes decision making, investment, management incentives all easier. You simply ask your self does this decision, investment or program move me closer to or further away form attainment of my vision?

The most difficult portion of any planning process is establishing and agreeing upon a vision. It’s difficult to put a stake in the ground for the future of your organization with so many fast occurring variables in today’s marketplace. But my view is you can decide your future or have it decided for you. Like the old saying goes, “which would you rather be the wind or the weather vane”?

Whatever method fits your organization I have just a few hard suggestions:

1. Begin with the end in mind
2. Document the plan
3. Communicate the vision and the plan
4. Implement the plan (studies show over 90% of organizations don’t)
5. Review progress to the plan on a regular basis
6. Align people, processes and incentives with the vision in mind
7. If you can’t be objective about internal and external analysis get outside help

You can sit back and react to circumstances or you can invent your organization’s future. 

If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business". 

Strongest job market is in DC, do they create value?

According to Bloomberg Businessweek this morning Washington DC is the nation's strongest job market. Read the whole article at this link.

http://www.businessweek.com/lifestyle/content/jul2010/bw20100713_490598.htm

The question is, many if not most of the jobs in the DC area appear to be providing services to the ever increasing federal government.

That means those are jobs that will be funded by taxpayer dollars being funneled to private companies and ultimately to their employees. 

While people getting jobs is certainly good news, the question remains where is the value that is created? If job growth is funded ultimately by the taxpayer, and the economic rebound is keyed on consumer spending, much of it from the same taxpayer, how does that work in the grand scheme?

Government and the economy would be better served by investing in small business and driving real growth than continuing the strategy they seem to be on.

If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business". 

How can you create value without funding?

I read in today’s Bloomberg Businessweek Report that the chairman of the Federal Reserve Ben S. Bernanke said that small business is having trouble getting access to credit needed to keep the U.S. recovery going.

The article referenced  Bernanke attending one of the series of meetings in Detroit last month and today recalling a business owner’s comment there that, “If you thought housing had declined in value, take a look at what equipment is worth.”

It’s absolutely true of course if business isn’t growing and equipment is at a surplus banks, which are conservative in good times, aren’t going to want to lend money on it. Most of small business collateral is either in plant buildings and / or equipment. The combination of real estate and equipment values being low makes collateralization difficult.

On the positive side I just had a client refinance his term debt at a great rate and excellent amortization schedule. The load was 90% guaranteed by the USDA rural enterprise program. Which is essentially a program that is working to create jobs in rural high unemployment areas.

First the company must be “bankable” that is approved by a bank subject to the USDA guarantee. A complete package of the loan evaluation by the bank along with company financial performance for the past three years and a detailed business plan showing sales and job forecasts three years out then goes to the USDA for approval.

Credit isn’t easy to come by but there are ways to get it. A company has to have solid financial performance, a well documented strategy and credible financial forecasts to go long with the collateral.

It goes back to what I’ve been preaching for a few years now. You have to have a plan that’s documented. You have to show progress toward making your projections and goals, and you have to have a credible plan moving forward.

Collateral alone isn’t enough anymore. Banks certainly don’t want to foreclose on your buildings or equipment, they used to get 10% to 25% of the loan value in a distressed sale. Depending on the equipment that number may be optimistic in the current environment.

It really goes back to a blog entry I made a few months ago, the strong find a way to survive and prosper in a poor economy and the weak don’t.

Leaders must take steps to clarify their vision for their organizations, document it, eliminate internal waste, and look for internal sources of cash before they will be successful looking at banks as a lending source. One bank I spoke to that specialized in USDA loans said they get anywhere from 12 to 25 deals a week to look at. They can afford to pick the best deals for them.

It is incumbent upon business owners and leaders to understand that there are sources of funds but competition is fierce, and only the best will be looked upon favorably. Strong economic times allows business to become complacent, weak economies make it imperative that they learn and adjust or perish.

In today's environment you had better have value before you look for funding.If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business". 

Invent your future with better strategic planning

I read a quote somewhere a few years ago that really made me think. The author said “the future is an invention anyway, you might as well invent a good one”.

If you stop and think about it, it’s really, true the choices and decisions we make throughout life accumulate to determine where we are and what we’re doing.  How many times have you hard someone say, if we knew then what we know now.

Well what if we did know then?  What if you actually had a vision of where you wanted to be in five or ten years, and made decisions and choices based on attaining that vision? You really would be inventing your future. Many successful people employ goal setting as a regular part of their lives. Goal setting focused on a clear vision.

Most people just don’t do that. They spend more time and effort planning a two-week vacation than they do determining what they are going to do with their lives. You wouldn't begin a road trip without a map, why would this be any different? 

 

Many of us look back one day and realize life just happened and they are where they are by _______________. You fill in the blank, luck, fate, breaks, whatever word you choose.

Well experience has taught me that organizations function in much the same way. The choices and decisions they make everyday accumulate to determine where they are in their market, and how well they’re doing. If those decisions are made with reference to a clear vision and direction, they would find that they are indeed creating their own future.

Chapter two of my book, “Bottom Line Focus” is entitled “Start with the end in mind”. It’s aimed at helping organizations and leaders develop a better strategic planning process, drive execution, and ultimately produce better bottom line results. The point of the chapter is before you start a planning process, sit down with all of the stakeholder and determine exactly where it is you want to go.

I don’t mean some vague statement saying I want to double sales, or double margins, but a clear crisp vision of what your organization will look like in five years. What businesses will you be in, what market share, what your market differentiator will be. It should be clear enough you can articulate it to everyone. Next step is sharing it with stakeholders often.

Once everyone understands the vision clearly, all decisions, processes, incentives, investments and other resources should be aligned to attain that vision. It makes decisions easier by simply answering the questions does this take me closer or further from my vision.

If you think about it you are inventing your future. You are clarifying what you want, and taking measured steps to get there. Of course it takes a few other things like honestly and objectively determining where you are now, and developing crisp goals to get from here to there. I could put a plug in here like hiring a great business coach to facilitate the process is a great help.

The point is, invent your future by making it happen rather than letting it happen.

If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business". 

Strategic planning for the real world

Strategic planning has gotten a bad rap, and probably deservedly so. If you believe the research more than 50% of organizations don’t have a documented strategic plan. My view is, of those that do the majority aren’t worth the paper they are printed on.

Why? Because most organizations simply don’t know how to plan.

There is usually a mission statement developed to please all stakeholders and to ultimately be placed on the company website and brochures for marketing purposes. After that there is usually some futuristic stuff based on revenue and sales forecasts that talk about growth. No real direction and not much talk about how the sales forecasts will be accomplished.

A strategic plan for the real world has to be better than that. It has to have clarity, goals and be used to drive accountability. Think of it as planning a vacation road trip. First decide where you want to go, determine where you are now, and then write down what it will take to get you from point A to point B.

Start with a clear vision, what will your business look like in five years? How many people and locations will you have? What markets will you be in? What will be your unique selling proposition? Take all of that and boil it down to a few sentences that you can keep in front of all stakeholders all the time.

Acme manufacturing will double sales from $10MM to $20MM in the coming 5 years and will be a world-class manufacturer of rubber ducks is not a vision statement. It’s more of a wish statement.

Acme manufacturing will develop a seamless sales and distribution network that will facilitate sales growth by at least 100%. We will be known as the highest quality on-time manufacturer of rubber ducks and other complementary bath leisure products in our industry.

 Now this is somewhat better. It speaks about what you want to be, and what you need to provide to get there.

After developing the vision statement, you do an in-depth S.W.O.T analysis to determine where you are now and what’s keeping you from being the world’s top selling supplier of rubber ducks.

You boil the S.W.O.T analysis down into 5 or 6 critical goal categories, and develop clear crisp timed goals to be accomplished over the next twelve to eighteen months to get you on the road to your vision.

You meet on a regular basis and review progress to goals. Are they on track, if now what needs to happen to get them on track? Are the assumptions still valid? Does everyone understand the vision and buy into it? Regular review and reinforcement is paramount to execution.

When the goals are met in 12 to 18 months sit down and review the plan, you should be well on your way to achieving your vision. You are a perhaps a third of the way down your chosen path, is it still valid? Did your market assumptions for rubber duck sales hold true? What other products or services will be a good fit?

Do the S.W.O.T. analysis based on the updated information and start the goals process again.

Effective strategic planning is a process not a one-time exercise. Understanding that change may be necessary and leadership and accountability are needed to drive execution are key first steps to effective strategy.

If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business". 

What’s the difference between a business coach and a consultant?

I get asked this question often, and it’s confusing because some people use the terms interchangeably.

The best way I can describe the difference is to explain what I do with my clients.

A consultant is hired to study a process or specific issue within the company, whether it’s cycle time reduction, cash flow, or whatever. He of she comes into the business, conducts interviews with the appropriate staff, and learns how the process is being completed now. The consultant then looks at what the outcome is expected to be, compares it to what it is now, and develops recommendations.

A business coach on the other hand does not take the time necessary to become a subject matter expert. He or she believes that the company management knows more about their business that he or she will be able to learn in a reasonable amount of time. The business coach facilitates a process that brings the management team together to solve the problem or issue.

Which way is better? A consultant is actually better if the problem is new to the business and the expertise, skills or experience doesn’t exist within a business. An example would be perhaps converting to a Lean Manufacturing System where outside guidance is needed for initial development and training.  Hiring a consultant for a general business issue or strategic planning is perhaps not the best way to go. The consultant will need to take the time to study your market; your industry, your product and depending on the complexity this could take a lot of time. You as the business owner are paying for that time while he or she learns what you already know for the most part.

A business coach uses proven tools and processes to facilitate the outcome by using your internal knowledge and challenging you and your staff to defend your assumptions and directions. An experienced business coach will use his or her knowledge gained from other markets or industries to lead you toward new and different ways of looking at your business. This is usually much faster and less expensive. In addition the solution to the problem or the development of the strategic plan is yours, you own it and you’ve developed it with outside help. It’s not something that is presented to you in a formal document and left with you as someone else’s solution.

I do both coaching and consulting depending upon the application and the problem. If the business doesn’t have the knowledge internally I, or one of the members of my network will help them develop it. I till try to facilitate ownership of the solution to insure better execution.

For things like strategic planning, diversification, improving bottom line profits I take a coaching role. I use the knowledge available internally and provide my experience and tools to help them look at things differently and to develop custom solutions that are right for their organization.

Be careful when choosing with a coach or consultant. It’s relatively easy to get business cards printed and call your self one or the other. Look for background and a solid track record.

If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business". 

WIIFM for better leadership results

In order to get the most from your employees, and from your staff you need to learn and communicate WIIFM. (What’s In It For Me). In order for employees to embrace organizational goals they must view them as their own. To do that they must clearly understand how meeting the goals of the organization is tied to achieving their personal goals.

It is much more difficult to separate personal and professional lives than it was even twenty years ago. Money alone is not the primary motivator but a short-term benefit quickly absorbed and forgotten. With the commonality of the two job household, work is a huge part of personal conversation and thought.

Leaders who take the time and make the effort to understand employee wants and needs, and helps the employee set personal goals that complement organizational goals will find better leadership results very achievable.

Goal setting is not a common practice among most of us. It starts by defining what you want in clear and crisp terms. Most of us have great difficulty in understanding or accepting what we want. Needs are easier to define, I need $500 more per month, I need a new car. Once the need is met the problem goes away and along with it the motivation.

Wants are very difficult to define. If you haven’t tried it you may be surprised. One of the exercises in our Leadership Development program is to develop a “dream inventory”. It’s a list of anything and everything you want to achieve or own or whatever your dreams are. We tell the participants to stop at fifty.

I have seen very few got even ten.

We are programmed to take care of needs and forget about most wants. If you can understand your employees wants and tie the achievement into attainment of organizational goals, you have a long term recipe for leadership results.

WIIFM starts with your personal goals and ties into your professional goals why should it be different with your employees?

Leaders need to encourage goal setting on a personal and well as professional level. Most people don’t have a plan for their lives, they just allow life to happen. They give more thought and planning to a two-week vacation than they do for the most important journey of all the journey through life.  If you can help your direct reports understand this and set goals, then have them take it down throughout the organization, how effective do you think that might be?

Explaining your organizational goals so al understand and giving everyone the opportunity to buy-in and develop personal goals that they can achieve through attainment of your goals is a win-win for everyone.

If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business".