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.

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

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.

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

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".