Way to Grow

More Cash Can Offset Need to Borrow

Sure, it sounds good -- bring in more cash rather than take out a loan when you need to, say, buy equipment for your business. Not so easy to do, you say. Well, yes and no. Wall Street Journal Small Business recently offered some suggestions on Innovative Ways to Reel in Cash, by Diana Ransom of Smart Money. The article tells about a spa owner who raised $30,000 in a single day by pre-selling services.

Other tactics Ransom suggested may work for you, too:

• Offer upfront pricing - Customer pays cash now for future discounted goods or services
• Discount items, sometimes - Selective discounting
• Purchase money financing - Give vendors a Purchase Money Security Interest (PMSI), a lien against goods that the vendors agree to send your business, and pay them when the items sell. (Good deal for vendors because a lien on new goods trumps other liens in a bankruptcy proceeding.)
• Switch from fixed to variable costs - Use hosted services rather than purchasing technology equipment. Maybe doesn't raise cash, but certainly eliminates need to borrow.

(Article found via @curtisfinancial on Twitter.)

The Business Plan -- Don't Start Without One

The rule when you need to borrow money to grow your business is that you show the potential lender your Business Plan. Yet the business plan requirement remains an argued topic year after year. The outlines of what must be included in the plan are clear, and in principal, people agree it is important that you have thought through the choices a plan defines. But the tough part, especially for first-time entrepreneurs, is the financial projection!

Cathy Curtis of Curtis Financial took on this subject in one of the first posts in her Curtis Financial Planning blog. She hosted a panel discussion of four women in the food business at San Francisco's Commonwealth Club recently. The topic was, "To Plan or Not to Plan".  The four panelists had produced the obligatory business plan at the start, but each quickly became irrelevant as reality intruded.

You could judge that the time spent on a business plan is also irrelevant, but Curtis begs to differ. She says:

I have no doubt that these amazing women will succeed. Street smarts and passion can take a business a long way. However, as a financial planner I see what bootstrapping can do to a business owner’s personal finances and I am duty bound to counsel caution. Here are  my three reasons why you should consider developing a business plan.

Writing a business plan compels you write down the numbers and
decide which are most important to your particular business – then it’s
up to you to watch them like a hawk.

Taking shortcuts doesn’t work when it comes to growing a business.
Writing a plan helps you to think strategically and decide what’s best for the company in the long term. This can even include an exit strategy.

Assumptions change and circumstances change, but don’t make that an excuse to avoid having a plan.  Even if you launched on sheer gut instinct, step back and create a plan now. You’ll be rewarded with clarity and peace of mind.

Can Small Businesses Receive Government Grants?

The answer is, "It depends." Rarely is grant money available to help get new businesses off the ground. By and large, government grants are reserved for nonprofit organizations, but there are exceptions as pointed out by Rich Whittle in The Houston Chronicle.

The Small Business Innovation Research. or SBIR program, awards grants to very specialized businesses that are involved in unique and innovative research projects. If you think your business might qualify, search the site for your specific industry to see what is available.

Other special cases where businesses may qualify for a grant are if you are:

• A veteran or disabled - You may be eligible for assistance to learn new skills or perhaps buy needed equipment for your business.
• In a distressed area - Your economic development organization may have aid to give you if your business will bring jobs to the area.

(Via Business Opportunities Weblog)

Surprising Entrepreneurial Demographics

If you're considering going into business for yourself and you happen to be over 55, you might be surprised to find that you are part of a groundswell! A recent study by Vivek Wadhwa of Duke University, and published by The Kauffman Foundation, found that, contrary to popularly held assumptions:

Over the past decade or so, the highest rate of entrepreneurial activity belongs to the 55-64 age group. The 20-34 age bracket, meanwhile, which is usually identified with swashbuckling and risk-taking youth (think Facebook and Google), has the lowest. Perhaps most surprising, this disparity occurred in the 11 years around the dot-com boom—when the young entrepreneurial upstart became a cultural icon.

These results are being attributed to several factors, including:

• With longer life expectancies and greater health in later life, older generations may continue to start new firms—or mentor young entrepreneurs.
• Since the first Internet-era recession, transaction costs and barriers to entry have fallen for entrepreneurs of every age.

Building an Effective Company Culture

When there's just one of you in the business, you're it -- brand, culture, deliverer of the customer experience. But as you hire employees and start to build out the organization, other personalities come to affect customer experience. That in turn affects your business brand. So it is important to set the right tone from the very start: Create a productive, effective company culture.

Some good suggestions come from Greg Gottesman in John Cook's Venture Blog. He advocates 13 rules to building a great startup culture:

1. No politics
2. It's not a job, it's a mission
3. Intolerance for mediocrity
4. Watching pennies
5. Equity-driven
6. Perfect alignment
7. Good communication even in bad times
8. Strong leadership
9. Mutual respect
10. Customer-obsessed
11. High energy level
12. Fun
13. Integrity

Do you think your ego can live with these rules, even #7 and #9?  How about #5, equity-driven? Would you be willing to grant a share of the business to people who really believe #2?  If so, and you have a great product for the current market, hire the right team and make it happen

10 Ways to Rebuild During Slow Times

Continuing the theme of my last few posts, I'm finding good material on how to counter the economic slump. Through a Twitter friend, @jenberkley, I found 10 things you can do for your business that won't cost you a cent (except some of your time, which in this case is a good investment). I paraphrase and abbreviate here, but you can read the post in full with the above link.

1. Ensure every customer touch-point is the best it can be
2. Ask customers if there are any new products or services they would welcome from you
3. Make it easy for customers to communicate with you, especially when there are problems
4. Measure to learn what marketing efforts are working -- or not
5. Look for further ways to differentiate yourself from your competition
6. Brainstorm with your staff on how to create buzz in your market
7. Do memorable things that will generate positive word-of-mouth
8. Look for ways to add value to everything you do
9. Explore how technology can save you money
10. Train your staff and measure their progress.

Although the piece only suggested brainstorming with your staff on #6, it could be very helpful to get your employees' suggestions on many of the other points, as well. If you're a solopreneuer and don't have employees, arrange a brainstorming session or two with colleagues whose businesses complement (or at least don't compete) with yours.

Making It Through to the Other Side of the Recession

Let's face it, numerous small businesses are having a tough time right now. While the optimist in me wants to remain upbeat, I do understand that a lot of you are wondering if your business will make it through this economy. A New York Times article calls it "the self-employed depression" and quotes one individual as saying, “We talk about it as middle-class poverty,” and describes "the vertigo of falling out of the middle class" when you can no longer afford to pay the bills.

It's worth taking a look at what Pam Slim said in "What to do when your work dries up, key client disappears or industry grinds to a halt." She wrote this post several years ago, and it's especially relevant today. She offers three suggestions about what to do when one or more of those situations occurs, and then follows up with how to protect yourself in the future. (Much as we'd all like to think this is a once-in-a-lifetime downturn, don't kid yourself. It could happen again.)  First, what to do now:

        Don’t panic - surrender. (Read what she says so this makes some sense.)
        Work your network of trusted allies and supporters
        Ask yourself “of all the things I could do, what is the quickest path to money?”

And several ounces of prevention against the future "nail-biting situation":

• Be extremely generous with your time, resources and referrals to your professional network.
• Secure financing and line of credit before you need them.
• Never get in a rut in your business.
• Diversify your client base [Avoid having just one big customer at a time.]
• Keep your fixed expenses to a minimum.
• Save for a rainy day.
• Cultivate a mindset of "disaster = opportunity".

Notice that she stresses your network in both sets of tips. Whatever you do now, keep your network alive and well. And believe that helping others in your network now will come back to you some day. It will!

When the going gets tough...

"One of the first casualties of tough times and adversity is self-confidence. It’s hard to believe in yourself when you have lost much of what achieved over the years and attempts to start again are met with rejection," says Carmine Coyote.

The tips for dealing with adversity that Coyote offers are mostly in the "stiff upper lip" category, but the closing point in the post is one worth pondering:

When things are going well, we have little incentive to change anything. We are too comfortable. But when they go badly, it’s worth reflecting that maybe they weren’t so great in the first place.

If you can see your present troubles as the crucible in which a new life is being formed, you can focus on how that should turn out and stop worrying about what went before. Just deciding what you want out of life, then focusing on trying to make that happen, will give your self-confidence a boost.

How to Fund Your New Business

There are at least 10 ways to fund a new business, and a startup consultant in Phoenix named Martin Zwilling was good enough to put 10 of them together in a short post.

The first four are the basics:

• Self funding
• Friends and family
• Small business grants
• Loans or lines of credit

The next three involve investors and are most typically used by technology startups:

• Startup incubators
• Angel investors
• Venture capital

The last three are creative approaches that may work better for some business than others:

• Bartering services for equity
• Partner with beneficiary company
• Partner with a major customer

Don't be afraid to put together some combination of these, either serially or in parallel.  In other words, some sources of funds may be more appropriate at different stages of your business, so you may use one early and others later. Be realistic about how much you can take on and how soon you'll be able to pay it back.

Eight Mistakes to Avoid in Your New Business

I love when a startup entrepreneur can give some clear, succinct advice on what not to do when you start your own business. Neil Patel has co-founded multiple businesses, and he recently offered a list of 8 Things I Wish I Knew When Starting My First Business.  I'll list the eight with a teaser on each but I urge you to go read the whole thing. Patel is a straight-shooter.

1. Don't pick a stupid company name - Patel's first two business names were chosen at least partially because they started with "A", but they failed in other ways. "A" only counts if you'll be getting most of your business from alphabetical directories like the Yello Pages.
2. Don't hire a lawyer, hire a law firm - What you want of a lawyer at first isn't what you'll probably want the next time. If you hire a firm, you'll have a broader set of skills at your disposal as needed.
3. Hiring doesn't solve all your problems - Patel offers four tips in this section, and I think two are key: "Hiring more employees is a lazy way of solving a problem", and "There are a lot more costs to an employee than their salary."
4. Slow and steady doesn't win the race - Enough said here. You can't wait until competition runs by you.
5. Networking is the key to success - Underscore that one when you take notes. So true!
6. No one is god - Paraphrasing on this one, don't believe all the advice you get. Take it with a grain of salt.
7. Have a business partner - Nobody is great at everything. Find a partner whose skills fill your own gaps -- and be honest with yourself about what someone else can do better.
8. Don't be afraid of the unknown - To quote Patel, "If you are afraid of something that you aren’t too familiar with, suck it up and deal with it. The worse that can happen is that you’ll stumble along the way."

These maybe aren't all the mistakes you could make, but they're eight big ones. Problem with this kind of advice early on is, you read it and then lose track of it as you go on. Or -- you could print them out, post them where you'll see them frequently, and ask yourself periodically, "Am I still on track?"

Where to Find Answers to Startup Questions

When you're starting your business, you often need expert advice; searching for it online can be bewildering when you get millions of results. Neil Patel of QuickSprout was kind enough to put together an extensive list of online resources on a variety of topics:

• Legal and Accounting
• Web Design
• Internet Marketing
• Hiring Employees
• Raising Venture Capital

Good stuff, but Patel goes on to offer some more helpful links on:

• General Business Advice
• Living the Frugal Life

This is one of the best compendiums of resources I've seen. You'll want to bookmark it.

10 Great Entrepreneurs Talk about Their Start-up Days

Inc. magazine asked the founders of ten great companies about their start-up experiences. The resulting article is not in-depth, but offers some little gems of wisdom to new and prospective entrepreneurs. Included in the 10 are:

• Gordon Segal of Crate and Barrel
• Ben Cohen and Jerry Greenfield of Ben & Jerry's
• Jerry Yang of Yahoo!
• Bill Gates of Microsoft

Making the Most of Slow Times

Many entrepreneurs who started businesses in 2008 are finding themselves less busy at this point than they had planned. If you are one, you're not alone. The economy has lowered all boats. But great advice comes to us today from Terri Lonier of Working Solo. She recommends that you "make the most of the holes you may find in your schedule these days":

• Expand your curiosity - Learn a new skill...
• Indulge an interest - Find a passion that you abandoned...
• Build relationships - It's the perfect time to reconnect with former colleagues...
• Push your comfort zone - Try something new that you were hesitant -- or too busy -- to do before...

If you're a solopreneur, you might want to subscribe to Lonier's Working Solo Minute newsletter. True to her word, she produces a useful 60-second newsletter each week. I don't have any connection to her -- just admire what she's doing. And her short, readable newsletter is a good model for any of you who want your "something new" to be starting your own business newsletter. This would be a great time to do it!

SBA Slow to Implement ARRA Provisions

So far, despite the belief that economic recovery will depend on swift implementation of government stimulus measures, the U.S. Small Business Administration (SBA) has implemented only two of its eight economic stimulus provisions passed in February. MSNBC, citing an Atlanta Business Chronicle article, reports:

Year-to-date lending numbers, however, remain far below last year’s levels. Through April 17, the number of 7(a) loans made this fiscal year was down 55 percent, and 504 loans were down 47 percent. SBA’s fiscal year began Oct. 1. Part of the reason for this decline was last fall’s collapse of the secondary market for SBA loans. Many lenders depend on selling their existing SBA loans on the secondary market in order to free up capital to make new loans.

The next two provisions SBA plans to roll out in June should help loosen up that secondary market.

Sadly, however, SBA officials told the Government Accountability Office (GAO) it was running behind because "creating regulations for new programs like these is complicated and time-consuming". And here's the root cause: "The GAO report also noted the SBA is hampered by lack of sufficient staff."

[Article found via Business Opportunities Weblog.]

Follow Up One More Time

Are you the salesperson for your business? If you have a solo business, you bet you are! And if you weren't an experienced salesperson before starting your business, you probably question how persistent you should be with your prospects. Even experienced sales reps aren't sure about this.

Lori Richardson, the Sales Coach over at AllBusiness.com, reports that:

...85 percent of sales are made after the fifth meeting but 95 percent of people who are selling give up after the fourth contact.

Her message is that you should probably follow up more. In this economy, where purchasing decisions sit on desks longer than they would in better times, making that extra follow-up call could make the difference in who finally gets the business. Do what you can to make it be you!