The Constant Entrepreneur: Advice for Running a Productive Buiness

Computer Backup

We all rely, need, and are totally dependent upon our computers. It is always interesting to me that when we buy a new computer it comes with firewall protection, anti-virus software, and anti-spam gizmos. But I have yet to buy a computer that includes any means of reliable continual data backup. Sure, VISTA includes some backup software but the computer does not include an external device (except for a CD writer/reader) to back up to – and who wants a deskfull of CDs!

I have tried a number of options including backing up to CDs, and backing up to external USB hard drives. But, if you are like me, backup is low on the priority list – and backing up data maybe happens once a week or once a month or even less frequently.

Unfortunately, this is not a problem just for personal computers, but I have seen successful growing businesses who exercise only infrequent, if any, backup.

The reality is – the hard drive will sometime go down. It is not a matter of IF, it is a matter of WHEN. Of course the further, and lesser, risk is that of fire. If you have a fire, it really will not matter if you backup or not if the backup media is stored with or near the computer. So the next challenge is taking backup media off-site periodically.

I have wrestled with these issues as long as I have had computers, and have, at least on one occasion, been badly burned when I did not have a current backup.

Recently a colleague introduced me to an on-line backup service called IDrive (www.idrive.com). This service is, I suppose, one of many on-line backup services. In any event, based on the recommendation I now subscribe to IDrive and sleep much better. Here is what IDrive gives me (besides peace of mind): Two gigabytes of off-site storage (Which is more than enough for what I need to back up). Automatic daily back up of any files that have changed during the day. The back up includes up to the prior ten versions of each file that is backed up, so if I want to view a prior version of a document or file I just retrieve it from IDrive.  The data is also encrypted, so only I can access it. Best of all, for an individual computer, it is FREE. There would be a nominal monthly charge if I needed more than 2GB of space.

If you are not regularly backing up your personal or business computer systems, IDrive is well worth looking into. Regardless of whether or not you use IDrive – the key thing is to find a way of backing up weekly, or even better daily, and secure backup data off site.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Your Best Friend – The Banker

I have established wonderful relationships with bankers, mainly business lenders, from many of the banks that serve the Cleveland market. I try to get together with at least one banker a week for breakfast, lunch, or coffee, just to chat.

This morning I had breakfast with a lender from one of the area’s regional banks. We talked at lenght about how businesses use and abuse their banking relationships.

The most valuable advice that came from the discussion is this. Keep communicating with your banker. Talk with the banker when times are good. But, more importantly, talk with your banker when things are not going well. Most banks will work with you if you have temporary trouble paying a loan – providing that you have talked with the lender as soon as you realize a potential problem. In many cases they will help to restructure the loan to reduce monthly payments, if needed. If, however, you just don’t make payments on the loan, and don’t answer phone calls from the bank, the bank will be much quicker to go after you for the money and will not be willing to work with you.

My friend said that the later scenario is all too common.

Make your banker your ally rather than “the enemy” by talking with them. Take your banker to lunch one a quarter and help him/her to really understand you and your business. Send your banker your financial statements each month (you do produce monthly statements, don’t you?).

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Attitude

As we do our day to day jobs, and interact with other people, it is all too easy to be brought down by negativity. As business owners we owe it to ourselves, our families, our employees, to keep a positive attitude even when we have a bad day.

When possible, I try to avoid negative people, and connect with people who have a positive outlook on life.

I find that I can also be helpful to folks around me by projecting optimism. I think that it is important to strive for conversation to leave people feeling better than when you talked to them, be they colleagues, customers, employees or family. Generally I can find something to comment on, and we both win!

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Advice

I had breakfast with a banker this morning. We had a nice discussion of the economic challenges confronting most business owners today, and the fact that banks have become so much more restrictive about lending out money to small businesses. Banks want to work with profitable businesses that can provide maximum assurance of servicing their loans. She suggested that business owners need outside advisors today more than ever in order to assure that they be as profitable as possible, with sufficient cash flow to sustain the business.

The banker lamented the fact that pride keeps many business owners from seeking advice before they get into trouble, or the bank begins to demand payment of the past due loans.

Her comments simply underscored the importance and urgency of every small owner surrounding him or herself with competent independent people who can advise on operations, sales, banking, taxes, insurance and more.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Employees

When I was running a business with about twenty employees, after one particularly frustrating day I came home and told my wife that running a business would be fun if it were not for the people! How often I have heard this echoed, in one way or another, when advising client business owners.

In analysing my own situation twenty years ago, and helping clients come to grips with their own frustrations today, I have found that problems with employees are not that difficult to resolve. A colleague, Ted Hill, remarked to me recently that no employee gets up in the morning and says “I wonder what I can screw up at work today”. Most employees want to do a good job.

Of course, it helps to have hired the right people in the first place. We’ll talk about that in another blog. So for now, let’s assume that we need to deal with the people that we have.

In the extreme case where an employee just does not fit the job and the company culture, the best that you can do for your company and the employee is to fire him/her – sooner rather than later. A poor performer who “bad mouths” the bosses just brings down morale and productivity of other employees.

In most cases, however, the key is to ensure that a) the employee’s personality and skills fit the job; b) the employee has been properly trained for the job; c) the employee has the necessary tools to do the job; c) the employee has been given clear instructions and given appropriate authority and responsibility.

The value of each of these is self-evident. But, so many managers do not properly equip employees to do their work. Even fewer employers really communicate well with their employees about job expectations.

At the first sign (and other signs) that an employee is not performing to your expectation, it is important to talk with the employee. I mean communicate – have a real conversation – understand why the employee is not performing. By communicating, and LISTENING, you can often quickly zero in on the underlying reasons for lack-luster performance. In many cases you may learn that the employee really does not understand what is expected, or that you are micro-managing, or that the employee has not been properly trained, or does not have the right equipment. It may be that the employee has a personal problem that is distracting him/her. What ever the problem might be, assure the employee of their value to you, and help them solve the problem.

I have a client who was tremendously frustrated with a key employee. The frustration had risen to a level where my client wanted to fire the employee. He felt the employee’s performance had suffered and that he was overpaying the employee. At my insistence, the client had a very open conversation with him. It turned out that the employee had recently been assigned work for which he had no experience or training. At the end of the conversation, the two had come to terms on appropriate training and processes to help to get the employee up to speed on the new work. The employee even agreed to take pay cut! Almost overnight, the frustration in both employer and employee disappeared.

Communication in every aspect of business is vital – but none more so than with employees.

Will Limkemann
Limkemann Buiness Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Finding Money for Your Business

Cash is the life-blood of business. You can’t pay employees, you can’t buy equipment, you can’t restock inventory without cash. But what happens when cash intake from sales does not keep up with cash outflow?

If you cash flow is negative because the business is not profitable, then you need to take needed steps to increase sales, cut costs, or both, until the business is profitable.

But, what I am talking about, is a profitable (or worst case break-even) business that needs working cash due to receivable aging, seasonality, or performing on that large order that just came in.

There was a time, before the mortgage crises, when banks were competing to provide unsecured undocumented loans of up to $50,000 to existing businesses. All you needed was a FICO credit score of greater than 670, proof that you were in business for more than a year, and fill out and sign a form.

Those days are no longer with us. In fact, today many banks are calling loans from businesses that they perceive are the least bit risky.

What is a business owner to do to get cash?

First and foremost, the higher your personal FICO credit score, the more favorably banks will look at you for a loan – personal or business.

Here are possible sources of cash:

1. Credit cards: While many businesses have been initially funded by using multiple credit cards, this souce of funding is not only potentially expensive, but if you tap out the credit cards your FICO score will suffer. I have worked with business owners who open credit card after credit card and are paying an average of more than 25% interest! It is hard to dig out of that hole.

2. Home Equity. This may be the best source of financing if you have equity in your home, and home equity lines of credit can be obtained at relatively low interest rates. Yes, you are putting your home at risk, but if the business is profitable and you need temporary cash, the risk is minimal.

3. Leasing. Buying new equipment? Consider leasing. Often the equipment seller can arrange for a lease. Many banks provide leasing. There are independent leasing companies. Many trade associations can provide for leasing.

4. Factoring. If your sales are busines to business and you have large outstanding current accounts receivable, selling your receivables to a “factor” may help your cash flow. This is a relatively expensive way to “borrow” money, but you have cash in the bank within a day or two after invoicing. This works only if you are selling to reliable customers.

5. Customer financing. If you are working on a major project for a customer, have the customer help with your cash flow by making an advance deposit and/or progress payments.

6. Bank loans. While this is last on this list, it need not be your last recourse for cash. Banks still have money to lend and need to lend it. It’s just that today they have raised the bar as to who qualifies.

You may well qualify for traditional or SBA backed loans. If your bank turns you down, don’t despair. Try other banks. Each bank has its own set of rules for lending. What is important is that you go to the bank well prepared: have at least a simple business plan which explains how the money will be used and how it will be repaid; have available a current set of financial statements along with financials for the past three years; have available your business tax returns for the past three years; have available your personal tax returns for the past three years. Know that for a small business the owner(s) will need to personally guarantee any bank loan.

Most important, you need to be pro-active and not re-active. Get a line of credit when times are good so you can activate it when needed. Always project your cash flow so you know when you will need money. I recommend a weekly cash flow spread sheet spread out over a 13 week period, that is updated weekly.

WIll Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Useful links

Here are some of my favorite web links that are valuable to the entrepreneur/small business owner:

www.Bizstats.com Bizstats has industry financial benchmarks for hundreds on industry classifications. See how your business compares with the industry as a whole. It is free, but a companion site offers more in depth information at a nominal cost.

www.cleveland.com/entrepreneur Cleveland Plain Dealer’s small business site

www.cose.org Web site for Cleveland’s Council On Smaller Enterprises (COSE). COSE offers not only insurance, but many forms of support to 16,000 Northeast Ohio businesses.

www.ideacrossing.org This is an outstanding site to connect service providers to businesses, connect businesses with money sources, and to connect money sources with businesses.

www.ibuyneo.com This is another outstanding source for northern Ohio businesses – linking businesses together.

www.manta.com Get basic information on thousands of US businesses. You need to register, but there is no cost. Find name of owner, address, phone number, sales dollars, number of employees, and more.

www.salary.com Salary.com provides wage benchmarks for many job classifications

www.sba.gov US Government small business web site

www.smetoolkit.org Lots of useful information for the small and mid-sized business

www.sos.state.oh.us Ohio secretary of state. You can use this site to register a company name, get corporate forms, even check status and ownership of companies in Ohio.

www.startupjournal.com Wall Street journal site for entrepreneurs and small businesses. Some great information.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Key Small Business Issues

A colleague, who is also a small business advisor, posed the following:

“Although we are all facing hard-times in this economy, I wanted to ask what you think are two or three key hurting points that small businesses are experiencing the most and how we can specifically target these issues striking a nerve with the owners. It seems that if they are really suffering more than usual, the need for help should be even greater.”

Here is my response:

What I tell small businesses owners when they ask if they should be worried by the economy – my answer is “no”. (If they are running Ford they should be worried!). They should look at the economy as a way of sharpening their business skills, evaluate the market, and make sure they are selling products that people want at a price they can afford. They may need to change their business model to do so, but small businesses are resilient if managed properly. So long as we have a country of 300 or so million people, there will be demands for every type of product or service imaginable. It is up to a business owner to smartly meet the demands his/her businss can fill.

What are the issues are most on the mind of small business owners? Oil and Fuel Related costs are at the top of the list. As business advisors we can help business owners by assisting them in improving efficiency and helping to pass the costs on to their customers. The approaches will vary depending upon the industry. For example, in landscaping we can: help to make routes more efficient, train drivers in fuel conservation, train customers to accept fuel surcharges, etc.

If the company is a plastics manufacturer, help may be needed in: negotiating volume purchase of raw materials, material waste management, pricing to reflect increases in material and fuel costs.  (Many small business owners do not know their profit margins or their fixed or variable costs – we can help there).

In summary, smart business owners are going to weather the current economic storm and even grow and prosper. It may mean that they need to look at things differently and change strategy, habits, and tactics.

Will Limkemann

Limkemann Business Advisors

440-871-0976

www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Management: Paying Attention To Numbers

One of the first questions I ask of a new client is to produce current financial statements (balance sheet and income statement). It is remarkable to me how few small business owners can comply! In one extreme case the the last time the owner had seen financials was eight months prior – it took his FULL TIME bookkeeper two months of updating records to get current! It is not uncommon for financials to be provided by an accounting firm on a quarterly basis, usually more than 30 days after the end of the quarter.

Financial statement to a business owner are like a chart to a sailor. You can’t possibly know where you’re going unless you know where you have been and where you are now.

An owner should have financials for each and every month, and on his/her desk no later than ten days after the close of the month. Better still is to receive a simple report of key numbers including month to date billings, month to date collections, outstanding accounts receivables, outstanding accounts payable, and bank balance every Monday morning (and monthly statements).

Income statements should be organized so that at a glance you can understand the gross profit, total personnel costs (including insurance, taxes, etc), and other key numbers.

A business owner should always know exactly how much money is in the bank, total sales dollars to date, and net profit.

With current numbers, adjustments can be made for growth and profit. Without current numbers, you are shooting in the dark.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Managing Accounts Receivable

A large challenge of many businesses is converting accounts receivable into cash. The problem has gotten worse over the last several years as larger companies are demanding extended payment terms (as long as six months in extreme cases), and collecting money is ever more challenging. I have worked with a number of businesses that are in reasonable financial condition except for cash flow due to outstanding receivables.

There are several strategies that can be employed to improve accounts receivable related cash flow.

1. At the outset negotiate the best possible terms. The reality, however, is that the small business does not have much leverage with a large corporation. It never hurts to try! But do remember that even if your invoice may say “Net 30″, if the purchase order from the customer says “Net 90″, the purchase order will over-ride the invoice.

2. Try to get an advance deposit. If the order is large, if there is custom work performed, or substantial material that needs to be purchased, negotiate an equitable advance. And don’t start work until you have the cash!

3. Make sure that the customer has received your product/service and that there are no outstanding issues which might hold up payment.

4. Follow up each invoice with a friendly phone call to accounts payable the day before the payment is due. Just inquire as to the status of the payment and receive assurance that the check has been written or will go out the next day. At this point, the accounts payable clerk can be your best friend. If, for example, she has no record of the invoice, then she can help track it down and see that it is paid.

Such follow up will reduce your stress as, rather than just waiting for a check and wondering when it will arrive, you will know what the status is.

5. “Factor” your invoices. While selling invoices to a third party (the Factor), is a relatively expensive way to get cash, the immediate cash can make the difference between meeting payroll and not meeting payroll. (Typically, you will have cash within one to three days of issuing an invoice). Shop around for a factor that best suits your business.

6. Maintain a strong line of credit with your bank – but use it judiciously. Make sure the line of credit is being used to level your cash flow, not to make up for operational defficiencies resulting in an unprofitable business.

Maintaing positive cash flow should be the number one priority for any business. Managing accounts receivables is a key element that should not be overlooked.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com