Trade shows

I attended the Home Improvement show at the Cleveland IX center yesterday, and was reminded of many shows over the past years in which I exhibited. It’s always interesting to pass by booths and read the body language of the various personnel. Some are standing, smiling, eagerly awaiting opportunities to talk with prospective customers. Others appear totally bored with expressions that indicate they would rather be getting root canals than manning a show booth. Some are engrossed in conversations with other exhibitors. Yet others are on their cell phones or reading the paper.

It got me to thinking about the value of exhibiting at trade shows. It can be a fabulous sales opportunity or sunken cost. Whenever I signed up as an exhibitor, my goal was to walk away from the show with orders equalling at least three times the cost of the show, meals, accommodation, and travel. Anything less I considered to be a failure. This goal did not include additional business resulting from follow-up after the show.

If you are preparing to exhibit in 2009, here are some things that should form part of your strategy.

1. Know in advance exactly why you will be exhibiting and write down your expectations from each show you plan to attend.

2. Prepare a detailed budget including all the fees, the cost of preparing your exhibit including material and labor, shipping costs, travel related expenses, entertainment expenses, and the cost of otherwise lost time for all personnel involved.

3. Double check well in advance that you have prepared the exhbit and all the material you will need at the show. Will you need power, internet connection, or special services? Contract for these well in advance.

4. Create a schedule for who will be manning the booth for every hour the exhibit floor is open.

5. Train all personnel who will be manning the booth, making sure they know to dress appropriately, know your product inside and out, and that they will be fully engaged in conversing with attendees.

6. I have found that putting literature out for people to pick up and walk away with is a waste of money. Most such literature gets thrown away without having been read. Have literature available that you can individually hand out to anyone who expresses a real interest in your goods.

7. Do someting unique to attract people to your booth. Give aways are popular, as are drawings. They work especially well when they relate to your target customers and/or your merchandise. Be creative.

8. Engage in conversation with as many people as possible. Show an interest in them. When you get their contact information ask for permission to follow up with them.

9. Prepare a follow-up strategy. Here is where most companies fall down. They collect dozens or hundreds of cards but have no real plan for follow-up – what a waste! Immediately at the end of the show, send a letter with appropriate literature. I have known some businesses that daily send contact information back to their offices and have office personnel send mailings while the show is still in progress. Within two weeks follow up letters with well-planned phone calls.

10. Do a post-mortem to evaluate how closely the show came to meeting your expectations, and use the information for help in planning the next show.

It’s amazing how fruitful trade shows can be when doing the right stuff.

When should a small business get help?

This morning I was asked an interesting question: “When should a small business seek outside help?”. The question is timely because so often I have been called in to help a small business owner when it is too late to save the business. A colleague complained to me yesterday that last week he had initial meetings with three small businesses which were all failing. His only advice to them was to close their doors. How very sad.

Small business owners are by nature self-sufficient and believe that they can do anything. The things that they don’t know they often don’t know. So when should they get outside assistance? When they are failing it is too late. Here are ten symptoms which, if not quickly addressed, may foretell failure:

1. Continual drawing on line of credit without paying it back down.

2. Declining sales

3. Employees concerned about their future

4. Not making timely IRS deposits

5. Ignoring financial statements

6. Quality control problems

7. Sleepless nights worrying about the business

8. Vendors putting the business on a COD basis

9. High employee turnover

10. Falling productivity

All of these are symptoms of deeper problems which may include ineffective management, poor planning, lack of a business plan, lack of a marketing plan or strategy, and inattention to financial data. These issues, when caught soon enough, can be resolved and once resolved substantially increase the chances of profitability and longevity of the business.

At some point business owners need to acknowledge that they may not have all the answers and bring in an independent small business advisor to help them.

Funding for small businesses

This post is an open letter to President Obama, Governor Strickland of Ohio, and leaders all over the nation who are concerned about small businesses.

While it is well accepted that small business is the backbone of our economy, the definition of small business is a bit fuzzy. Some federal agencies specify that businesses with fewer than 200 employees are classified as small. I would submit that a business with 10 employees has issues that are foreign to a firm with 200 employees. These very small firms, and there are millions of them, are the real backbone, and combined, hire millions of workers across the United States.

These very small businesses are being hit especially hard by the recession. While it is true that many of them would not be in dire straits were they better managed, most are being deeply affected by the 2009 economic climate. They typically have no cash reserves and today are virtually unable to secure bank loans or other financing, and so are having to lay off employees or consider closing their doors. These businesses are not making the news as they are laying off one or two employees at a time.

Many folks who have lost their jobs from large and small companies are  budding entrepreneurs who could create jobs for themselves and others while contributing to the economy, but are unable to secure funding to get started.

So here is my, perhaps naive, suggestion to President Obama and other leaders.

You are currently spending billions of dollars to justifiably shore up some mega companies to prevent the whole house of cards from collapsing. While this is necessary and noble, please, please, don’t overlook the thousands of small businesses that are on the verge of failing. You can help them by making easily available low-interest loans – loans that might even be forgiven should the businesses reach certain economy-driving milestones.

I’m not talking about handouts. Establish criteria that will not result in a bureaucratic nightmare. The criteria should include numbers of jobs to be saved and potential job growth. The criteria might also require that business owners either enroll in and attend business management classes at local colleges, or be supported by approved business advisers, in order to improve their management skills. The funding should be open to new entrepreneurs and existing companies who can prove need in any industry.

Pass the money through local banks, and hold the banks accountable for responsibly distributing the funds to businesses in need who meet the criteria. Money should be distributed over time depending upon a business achieving specified milestones agreed to between the bank and the business owner.

Finally, I would challenge President Obama to immediately convene a very small committee of folks who really understand the plight, needs, and challenges of small businesses to come up with a workable program.

Do you rely too heavily on one customer?

It is no news that bail-out money is not trickling down to consumers or even small businesses. What is affecting small businesses is the trickle down of business closures and belt-tightening.

Companies that get hit worst are those that rely too heavily on one or just a few customers. An old Cleveland area stamping plant which sold exclusively to the auto industry has just announced that it is closing.

Any business that relies on a single customer for more than twenty percent of its business needs to assess its risks should sales to that customer disappear. If losing those sales could deal a devastating blow, proactive measures must be taken immediately, measures like increasing marketing and sales activities and increasing operational efficiencies.

If your business relies on one company, or even one industry, for forty-percent or more of your business, you are particularly vulnerable and need to take immediate action to broaden your market. Can your products or services be used by other companies or markets? If so, develop a sound marketing strategy to attract other customers. If not, how can you either modify your goods or services or create new ones that will have broader appeal?

Now is the time to be proactive and aggressive. You can’t wait until you lose your major customer.

When is it time to fire a customer or client?

An accountant told me about a seminar he attended for accounting firm owners owners. The leader suggested that firms periodically “fire” the bottom 20% of their client base. These are clients that produce little revenue, are not profitable, or are just not pleasant to deal with.

He got me to thinking that this excellent advice may well apply to almost any business. The conventional wisdom is that 80% of sales derive from 20% of a firm’s customers. Why not, then, evaluate the lowest performing customers? So often these customers are not only producing marginal sales and profit, but too often they require an inordinate amount of support and “hand holding” further eroding any profits they might produce. Should you be spending time with these customers, or fostering even better relationships with better and more profitable customers?

When you encounter an unprofitable or unpleasant customer, and you will, raise your prices so high that you will be unreasonable to work with, or simply tell the customer that it no longer fits the profile for the direction of your business.

Some business owners are afraid to let customers go for fear that sales will decrease. But, take a careful look at each poor performing customer. If customers are not profitable, “fire” them and let them be someone else’s problem.

Surprisingly, sometimes a fired customer will return begging to do business with you and will turn his/her attitude around and they will end up as good customers.

Business Real Estate

I had a delightful conversation at Starbucks yesterday with Laura Malone, a commercial real estate representative. I wish I had known, years ago when I was leasing office space, what I know now after talking with Laura.

It is key is to plan well in advance for both moving to another facility or even renewing your present lease. Minimum planning period is six months and ideally you should be planning a year in advance. If you do what I always did, you file lease when it is signed and forget about it and its terms until the owner approaches you about renewal. The owner is now in the driver’s seat, as you have little recourse but to renew the lease on the owner’s terms, or move out. But you probably don’t have enough time to find a new space, negotiate a lease, make provisions for build-out and moving phone services, and move.

Laura suggests getting in touch with a commercial real estate broker about a year before the lease expires. This will usually cost you, the renter, nothing, as the broker is compensated from a split of the commission paid by the owner. Let the broker help you assess current and future needs and either negotiate with your present landlord or, if your needs dictate, find a new location. With assistance, you may realize a savings of 10 percent or better.

While the commercial real estate market has not suffered to the extent of the home market there are, in most areas, plenty of vacancies that need to be filled. Owners are open to negotiation and brokers know which buttons to push.

So if your lease expires in a year or less, do yourself a favor and talk with a few commercial real estate representatives and find one you are comfortable with. Then let him or her be your advocate.

Finally, before you sign whatever lease is negotiated, have your attorney also review it and advise you. After all, when you sign a multi-year lease, your may be committing to paying hundreds of thousands of dollars or more.

Family Businesses

Over time I have had the opportunity to consult for many family businesses and have found them an interesting lot, especially when it is time for the second generation to take over.

These businesses often face huge challenges and, as a result, many simply do not survive.

First is a control issue. The founder, no matter what his (usually a “he”) age simply will not let go; does not accept that there is anyone else who can make good decisions; and cannot understand that there could be any way of running the business other than how he ran it for decades. In short, he meddles and does not let the next generation spread their wings.

Second is a succession issue. In some cases no one in the family is interested in the business, and one child or another is pressured into taking over the company. In other cases more than one of the second generation siblings are involved with the business and no clear leader has been selected, leading to fighting, resentment, and poor management. Lack of a succession plan can be especially traumatic to a business when the founder suddenly dies, but can be devastating to both the family and the business even when the founder starts receding from the day-to-day operation of the company.

Successful transitions come about from thoughtful advance succession planning, grooming of the heir apparent, and then passing control to the new CEO at the appropriate time. Can family squabbles be eliminated? Not always. When multiple children are involved, the founder needs to make every effort to be fair to all of them. Only one can be selected to run the business, and the selection should be made as objectively as possible, sometimes with outside help and evaluation. The founder needs to explain to the family why and how the decision was reached, and at the same time offer cash, stock, or appropriate positions to the other family members.

In some cases the best succession plan is to sell the business and to provide each child a proportional share of the proceeds in the form of cash, trusts, or inheritance. As with any succession plan, such action needs to be planned years in advance to maximize the value of the sale.

Careful succession planning and transitioning is good for both the family and the business. And that should be important to the founder, as both family and business are the legacies he is leaving the world.

Lack of planning and inability of the founder to let go most often tears up the family and destroys the business.

If you run a family business, which option do you prefer?

Business Plan – Part 6

Today I will continue with defining a simplified business plan that is applicable for a very small startup business. We have previously discussed a vision and mission statement. Today’s topic is the all-important one of defining your market.

Before you can sell anything you need a clear understanding of exactly what products and services you will be offering, and just as important, you have to figure out who will be willing to buy your stuff. A market definition answers the all-important questions about how many potential customers there are, who they are, where they are located, and what needs they have that will be satisfied by your products and services. No matter how unique you believe your capabilities are, the reality is that you are not alone in the marketplace, so you also need to research and describe your competitors, the threats they pose, and how you can successfully compete against them.

Information for everything you need to know about your market and competition is readily available. Start with sites on the Internet like the US census bureau at www.census.gov or the Small Business Administration at www.sba.gov. You can Google to find mountains of information. The reference librarian at your local library will be able to point you toward scads of print and on-line reference material.

A market definition for a small exclusive picture framing shop might be: “Our market is any institution or individual within 100 miles of Philadelphia who collects art and needs to have artwork framed or frames restored. There are roughly 300 museums in this area, and up to 10,000 high worth individuals who collect art. Competition is comprised of museums with internal framing staffs, and three local companies specializing in fine art framing. There are also several dozen small framing shops that do not specifically target this market.”

Networking event

A good friend invited me to a networking event last night. First, I really, really, don’t like networking events and tend to avoid them like the plague. Second, I didn’t really know what to expect as it was held in the once-stuffy Union Club, and was sponsored by a group called “3 Guys Present”. The invitations are to interesting people who want to meet other interesting people!

Wow – what an event. With over 100 people attending and everyone mixing it up with everyone else it was the best networking event I have attended. Good people, great food, fantastic networking. One reason, I believe, for successful mixing was that name tags contained just names, no companies, so everyone was curious about everyone else. The name tags also had unexplained dots of various colors which also generated a good bit of conversation. A second reason that I liked the event was that I met so many new and interesting people – most of the events I go to seem to be the same old. But out of 100 people, going in I probably knew no more that eight or ten, and am glad to say I now know many more. Running from 5:30 to 8:30 it was also one the the longest networking events I have attended.

We were all given a wonderfully warm welcome to the Union Club by the first female president in its long history, and a tour of the refurbished club was offered to anyone who wanted to see the facilities.

Now here is the best part. The 3 guys who started the event a year ago wanted to create unique networking events (which they did) that also  to promote area entrepreneurship (which they do).

At each event they honor and introduce a young entrepreneur who has come up through the ecity program (www.ecitycleveland.com), and provides a small grant to the entrepreneur. The featured business last night is called Cosfurs and is run by two seventeen-year-old sisters. They make fuzzy costumes and mascots and sell them over the Internet, and have more business than they can handle.

My congratulations to the three guys: Bob Aber, David Akers, and Jeff Nischwitz. I look forward to future quarterly events which they claim will go on for 40 years! May this model be duplicated.

Sending e-mails

Most communication today seems to be by e-mail. I don’t know about you, but I find it terribly frustrating when there is no subject, or perhaps worse, when the subject tries to be cute. I find it annoying when every e-mail from a sender is marked urgent.

So I was gratified to see a blog today from marketing guru Seth Godin, which lists common sense e-mail protocol. You may want to check it out at:

http://sethgodin.typepad.com/seths_blog/2009/01/how-to-send-a-p.html