Excess Inventory

I have consulted with several clients over the past few months who have been in financial crisis yet are holding on to un-needed inventory, tying up both dollars and valuable space. In two cases selling off the excess material would have been the equivalent of more than one month’s gross receipts, and would have done wonders to improve cash flow. The inventory in question had collected dust for many months, and will continue to do so as the owners elected to do nothing, even though the inventory is not likely to be used or sold.

Here are some things to do when caught with excess inventory you can’t move:

1. Have a sale and market it sufficiently to attract enough buyers.

2. If the inventory is raw material, find a way to use it in creating unique products, re-purpose it, or find another manufacturer to buy it at a discount.

3. Sell it on an E-Bay auction.

4. If all else fails, scrap it. At least you’ll free up some space and write off the loss.

What recession?

The experts all agree, and our own experiences and observations confirm, that we are in the grips of a recession. No one really knows when it will end and what will be on the other side.

Yesterday at lunch I posed a question to a business owner, “How is the recession affecting your business?”. His quick answer initially startled me then got me thinking. He replied, “I refuse to participate in the recession, so it does not affect me”.

I will say that he provides productivity software to large companies, and thus far these types of businesses have been doing very well.

Yet there are two aspects to the recession (or anything negative). The first is the reality. The second is how we respond to the reality. If we acknowledge there is a recession but refuse to participate our outlook, actions, and fortunes, will be totally different from what they might be if we succomb to the recession with a fatalistic attitude. Something to think about.

What business should you be in?

With thousands of people losing their jobs each month and many other retired folks trying to make ends meet, a whole lot of people are thinking about and actually starting their own small businesses. Some will be lifestyle businesses geared to bring in just the income the owner needs, while others will be launched with the intent to hire people and grow.

In talking with many folks looking to start a business, the first question I ask is “what kind of business”. The answer, which used to surprise me, often is “I don’t know. I have lots of interests”, or “I may try this and if it doesn’t work I’ll try that.”.

Before risking time and money on a business, a budding entrepreneur needs a clear focus and vision for an unwavering business concept. How do you determine what kind of business you want to start? Here are a few guidelines:

1. If you have a really strong passion, consider how to turn the passion into providing goods or services that someone will pay money to get. If you are passionate about food, opening a restaurant may be out of the question for you, but you could consider catering or creating specialty foods to sell to restaurants, farmers markets, over the internet, or to retailers, or other options. Start making a list of the possibilities.

2. Determine what really excites you. Don’t start a business unless you really like what you will be doing.

3. Build on your education and past experience. While opening a business may be a great opportunity for you to try something new, you can minimize the risk by doing what you know how to do best. One word of caution: honor any non-compete agreements you may have from prior employers.

4. Consider whether your hobbies or avocations can be turned into money making propositions.

5. If you have been laid off, is there a possibility you can provide services to your prior employer as an independent contractor?

6. Still undecided? Visit http://www.ahbbo.com/ideas.html for a list of 400 businesses you can start from home to tickle your imagination.

Once you have determined your direction, stick to it with dogged determination. Don’t be sidetracked by other great ideas.

Small business IT frustrations

Those working in the corporate world, or in larger small business that have a technical support person on staff are indeed spoiled, and should count their blessings that help is available.

Those of us working solo, or in the majority of small businesses, depend on our wits, our limited understanding of computers/Vista/Internet, and all of the wanted and unwanted trappings that go along with them. When things work well, the computer is a wonderful tool. When thing go wrong – oh the frustration.

I was humming along nicely on my ‘puter this morning, when all of a sudden my firewall started preventing me from using network printers, synching to my Blackjack, and making me go through hoops just to get to Google and this blog site.

It seems that during the night AVG (my virus protection software) decided I needed an update, which was activated at 8:30 this morning. Not only did it update my anti-virus, but it decided it wanted to be my firewall and kick out the Microsoft firewall I had been using.

Previously I had configured AVG to not use its firewall due to similar frustrations I had encountered today, and I had carefully made sure the Windows firewall was turned on. Apparently AVG is really upset that I did this, because they not only turned on their firewall, but have completely prevented me from turning it off and using Windows!!!!

I have tried to log onto their help site but keep getting errors – it could be 3 zillion other people are as frustrated as I and are also trying to get to AVG help.

If I had a resident Guru, he or she would probably be able to fiddle with my computer for five minutes and get me back to where I should be. But, being on my own, I’ll just have to limp along until I can find some help at AVG. Wish me luck.

Know when to fold ‘em

The poker cliche “know when to hold ‘em an when to fold ‘em” applies equally to businesses. Those who follow my blogs know that I am by nature optimistic and often find creative ways to help struggling businesses survive and thrive.

Yet the grim reality is that not all businesses can and should keep their doors open. I spoke recently to a colleague who also consults with small businesses who commented that in the last two weeks he took appointments with three small businesses to which the only advice he could give them was to liquidate.

Owners that fail to properly market their business, lead their staff, manage finances, or meet customer expectations should close their doors sooner than later to avoid extreme financial risk and hardship to their families.

Here are some extreme warning signs that should not be ignored and probably indicate the business should consider liquidating or filing for bankruptcy:

1. Owner is not taking any income

2. Employees are not being paid on time

3. The net worth of the company is approaching zero or is negative

4. Back taxes are owed the IRS or other taxing authorities

5. Banks are threatening to foreclose or call loans

6. The company relies on a single customer for more than 30% of its business

7. There is high employee turnover

8. Suppliers are putting the company on a COD basis

9. Customers leave because of, or complain about, poor quality

10. Sales and profits have been declining year after year

Small Business Open Letter to President Obama

Dear President Obama:

The Small Business Administration (SBA) was established to assist small businesses and to provide guidelines to other government agencies which from time to time may or must deal with small businesses. Accordingly it has established numerical size definitions, either in dollar sales or number of employees, for various industrial classifications. Aside from agriculture virtually any business with under 500 employees or $7 million in sales is classified by the SBA as a small business.

Census bureau statistics reveal that there are over 20 million businesses with just a single employee,  5,377,631 business with between 2 and 19 employees employing almost 30 million people, and only 627,000 businesses between 20 and 500 employees.

I submit that the very small businesses consisting of owner/employee businesses and enterprises with less than 20 employees have issues not even imaginable by the folks who run the small minority of businesses designated as “small” which would have 100 or more employees. Yet it is the larger of the small businesses which have  leverage with the SBA, the administration at large, and the congress.

It is no secret that our economy, today more than ever, is being driven by millions of small businesses. The number will only grow larger as thousands of unemployed people get the entrepreneurship bug and open their own companies. Now the sad news is that many existing small business and many new ones are destined to fail through bad timing, bad management, and lack of capitalization.

The time is now for the federal government to give recognition and assistance to the very small businesses to empower more of them to survive and provide increased employment.

Let’s start with a national roundtable discusson of top government officials meeting with a cross section of owners of companies with fewer than 20 employees to discuss the particular concerns, issues, and problems facing these organizations. Use the findings from the discussions to craft an agenda that will help improve the survival and success rate of these businesses.

Short of a national roundtable, a few measures that could and should be quickly considered are:

1. Provide tax credits to anyone investing in a startup or very small business.

2. Provide grants or tax credits to any business for each new net employee hired.

3. Release TARP money for low-interest lending to very small businesses with minimal paper work. Thousands of businesses are struggling because banks have either called their loans or will not issue lines of credit.

4. Release TARP money for business startup loans which could be forgiven upon achieving preset hiring milestones and profitability.

5. Encourage entrepreneurship at the high school level by funding courses that teach young people how to be innovative successful business owners.

President Obama, I can’t even begin to imagine how big your job is in dealing with mid-east conflicts and a financial crisis at home and world-wide. I am convinced that paying attention to, and helping out, small business is one of the tools you need to use to help restore economic health to our great nation.

Sincerely,

Will Limkemann
Small Business Counselor
will@limkemann.net
www.neobizadvisor.com

Habits for effective hiring

When hiring an employee you want to minimize costly mistakes. Here are 8 steps of effective hiring:

1. Have a strong mission statement and vision for your company that will excite a prospective employee.

2. Develop a detailed job requirements document for the position to be filled to help you weed through candidate qualifications.

3. Develop a thorough job description for the position so there is clear communication about the job between you and the candidate.

4. Subject the candidate to personality and skills assessments testing to assure the individual can do the job and fit into your culture.

5. Develop and practice effective interviewing techniques to maximize the value of the job interview for both you and the candidate.

6. When offering a job, make sure your wages and benefits are competitive.

7. Welcome new employees, introducing them around, and doing everything you can to make them feel a part of the team and productive from day one.

8. Oh, and if a mistake is made in hiring and the employee does not work out, terminate the relationship sooner rather than later. This will be best for you and the individual as well as sending a positive message to other employees.

New hire background checking

While we hear daily tales of gloom-and-doom layoffs, there are still strong well-managed businesses that cater to the real needs of both consumers and businesses. Looking at Monster.com or help wanted ads reveals many businesses needing to hire quality help. I’m sure every ad yields an overload of responses. It is definitely an employer’s labor market.

With so many people to choose from there is no reason not to pick the absolutely best person for the job. Most small employers rely on resume and application information combined with gut instinct after cursory interviews. Few small businesses exercise due diligence in background checking, other than sometimes making a call to a prior employer or reference.

Unfortunately, most prior employers will not reveal any information beyond dates of employment for fear of being sued for defamation. I understand that some states now have laws protecting employers from frivolous defamation lawsuits to encourage sharing of proven bad behaviour with potential employers.

When hiring someone with a prior history of sexual harrasment, abuse, or a criminal record, the new employer may well be at risk for not having learned of the bad behaviour.

Money is well spent on hiring professional firms to do background checks prior to hiring a new employee, especially if:

• Your business has proprietary information or deals with confidential information which, should it be misappropriated, could harm you or a client
• The person will be involved with financial data, accounting records, payroll, accounts receivable, accounts payable, or handling cash
• The person interfaces with the public – especially if they go on site to customer homes
• You are in the health-care industry
• The person will have any contact with children

There are established firms specializing in employee background checking which may include: drug testing, searching for criminal records, verifying education credentials, credit checks, prior employment verification, and more. The cost can range from around $50 to several hundred dollars, but is a small investment if it saves you from hiring the wrong person. The National Association of Professional Background Screeners, www.napbs.com, is a starting point in locating a firm to conduct your testing.

Budgeting

Budgeting is a discipline that can benefit individuals, companies, and non-profits. I chair a church finance committee which, for as long as I can remember has prepared an annual budget with income and expenditures consistently tracked monthly against the budget. The key has been to involve all relevant stakeholders in the budgeting process so that everyone actually “owns” the budget. The financial statement prepared at the end of each month lists current month and year to date income and expenses along with current month and year to date budget, and the variances between actual and monthly. Anyone with a need or desire to know can understand at a  glance the financial picture of the church or a single line item. The accountability provided by the budget helps everyone monitor and control expenses.

In a time of tight personal and business finances, good fiscal management can result from making and using budgets. Businesses using QuickBooks or similar software can easily track actual versus budgetary performance monthly.

I have been helping an individual establish a budget to help her reign in her spending. For starters I had her track spending for a month by writing every single purchase she made in a little notebook. At the end of the month she was surprised at how much money she was spending on trivial un-needed stuff and junk food. With the spending pattern in hand it was easy to create a montly budget, and there was plenty of money left when she realized she can and should control her spending on trivial things.

The same discipline can apply to any small business. What I have seen as especially tempting is purchasing little things on credit cards, adding up to large credit card balances. Any individual or business that is in a financial bind needs to budget and adhere to the budget.