Posts Tagged ‘Money Management’


10 Pieces of Advice to Ignore

Entrepreneurs get advice every day from their professional advisors and information they read. A lot of it needs to be ignored. Pay close attention to disregarding these platitudes and what to do instead:

  1. It takes money to make money. Many entrepreneurs spend too much money getting their company off the ground. In fact, having a lot of money can lead to being wasteful. Use small investments to test ideas and get paying customers. Based on this success or failure, spend alittle more money to test the next action.
  2. Do what you love and the money will follow. This principle has the entrepreneur focus on what they want to do instead of what the customer wants. Building a company is about finding the pain a buyer has, not what the entrepreneur wants to provide. Instead, do what you love and if you solve a customer’s pain, the money will always follow.
  3. Failure is required for success. This is what many entrepreneurs tell themselves when they fail. While failure is not required for success, ultimately it is part of every entrepreneur’s experience. Never fear failure. When it comes, acknowledge it, learn what you can, then take another action to give you another chance at success.
  4. Failure is not an option. Not only is it an option, it is the most likely outcome. Get comfortable with the fact that you will fail some of the time and not knowing exactly what will happen next.
  5. A penny saved is a penny earned. This is short term thinking. While it is important to be carefully frugal with your money, not every transaction needs to yield the maximum profit. Successful business owners invest in long term relationships.
  6. Good things come to those that wait. Waiting is typically not in an owners DNA. As another platitude says “Don’t wait for your ship to come in, swim out to meet it”. Being proactive rather than reactive will typically win the day.
  7. A penny for your thoughts. Be careful not to give away your value to customers for free. Entrepreneurs typically undervalue their products and services since they are uncomfortable asking customers to buy.
  8. The customer is always right. If the customer was always right, most entrepreneurs would be out of business! When the customer has a concern, the most important thing is to listen and show empathy. They don’t need to be right, but always need to be heard.
  9. Another day, another dollar. Making money is not a linear process. Successful small business owners look for the leverage in profitability and this typically is not in the form of working harder or longer hours. Look for the financial leverage points in hiring other people, intellectual property or a dedicated distribution channel.
  10. Money doesn’t grow on trees. While this is literally true, there is ways to make money all around any entrepreneur. Follow the customers that have the money to solve their pain and the money will follow. 

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Mondays with Mike: 5 Foolproof Tips To Make Better Decisions

Stocksy_txpfff38493BN6000_Small_45968When you think about it, running a business is all about making decisions.  Let’s face it: if you didn’t have the drive to be a decision maker, you’d work for someone else, right?  As an entrepreneur, you’re faced with decisions every day – whether it’s a question about hiring a new employee, embarking on a new marketing plan, or managing costs by improving efficiency.  Successful business owners make good decisions, and the good news is that you can improve your decision making skills by following these tips:

  1. Follow the 10-10-10 rule.  Biz guru Suzy Welch gives us this technique for making decisions based on their long-term effects.  Consider the outcome of your decision in ten minutes, ten months, and ten years.  Let’s say you’re struggling with a particularly difficult client – the one who sucks up all of your time and energy and provides little in the way of revenue.  You’re trying to decide if you should kiss up to them for the umpteenth time to smooth over their latest ridiculous complaint or if you should cut your losses, fire them, and move on.   If you fire them, you know that in ten minutes, you’ll be panicked, worried about the loss of revenue.  But in ten months, you’ll realize that you’ll be happier for having eliminated the anguish this client produced, and in ten years, you’ll have been able to generate far more income from new, less problematic clients that you’ve been able to bring in with your renewed energy and freed-up time.  Think long-term.
  2. Create a stop-loss plan.  And follow it!  Entrepreneurs are seldom devoid of ego, and it’s far too easy to make a decision, ignore all the signs that the decision wasn’t the wisest, and continue well past the point at which you should have thrown in the towel.  A stop-loss plan forces you to evaluate your decision based on predetermined, concrete parameters, rather than on the results you’re hoping for.  Whether it’s a trial period for the pricy new sales rep you hired on, or whether it’s a minimum requirement for a new advertising campaign, you’ll make better decisions if they’re based on results, rather than hopes and ego.
  3. Employ split testing.  When you’re torn between two (or more) equally plausible choices, use split testing to try both options out before you commit to one.  Let’s say the sales rep for the community circular that you advertise in brings you two options for your next ad.  If you have the chance to run both ads, perhaps in different areas, or in different months, you can find out definitively whether the ad that touts your long-established history in the area is more effective than the ad that shows off your reasonable prices.  The idea is to make a decision based on hard data, rather than assumptions.  Online advertising makes it particularly easy to run split testing, as you can create and employ multiple variations with ease.
  4. Do thorough research.  You’d feel like a fool if you tried and failed with some radical new tactic to bring in new business only to discover afterwards that your competitor had already tried and failed with that tactic.  Look around you.  See what your competition is up to, and look to history to give you insight into proven – and disproven – strategies.  Fortune does favor the bold – those folks who forge new pathways – but fortune also favors those who do their homework.
  5. Sleep on it.  This last tip is the easiest and most foolproof of all.  People make decisions based on emotion, and that’s often a mistake.  Simply giving yourself time to think a decision over will almost always lead you in the right direction.

Hiring, firing, spending, saving … all decisions that we face every day.  Commit to making better decisions, and you’ll find those good decisions reflected in your bottom line.  


How to Survive the Business Triangle of Fast, Good & Cheap

Posted on by Carol Roth

Stocksy_txpdb49d990KT5000_Small_125569When was the last time a customer told you that money is no object as long as you produce a good-enough product or service whenever it is convenient?  OK, you have a right to laugh because these situations only happen in the dream world.  In the real world, customers make unreasonable demands every day.  It is your job to find realistic ways to make your customers’ dreams come true.

A Quick Lesson on Project Management

Any certified project manager (or even someone who plays one on TV) can tell you about the triple constraint that affects every project without exception.  Also known as the “business triangle”, this rule says that projects involve three basic components: time, quality and cost.  You can skimp on any two of these components, but not all three.  This triangle is indisputable, but unlike the Bermuda Triangle, you can in fact get around it.

So, what do you do when a prospective customer wants to pay standard costs for you to create custom order tracking software for their business in two weeks?  Sure, you can turn down the job, recognizing that you’ll have to throw profits out the window to bring a high-quality project in on time.  But, I often advise companies to figure out ways to deliver everything that the customer needs on time and within budget — and sell it to the customer.

Different Levels of Quality

Obviously, every product or service must work properly and deliver the results that your customer needs.  But in the project management world, a major part of quality is scope, so now is the time to figure out what that customer truly needs to track orders easily and accurately.  This can involve eliminating unnecessary bells and whistles or even finding reasonable ways to develop most features that your customers want, even if they don’t absolutely need them.

For example, you have to customize the data entry screens to suit the customer’s requirements.  But, rather than developing the mountains of reports that they requested, plug in a third party report generator.  You’ll probably want to create the most important reports for them, but they might be thrilled when you sell them on the idea that they can easily create any report that they want on a whim.

At a minimum, if your client is hyper focused on speed and/or cost, then you need to sell them on the idea that version 1.0 with less features is appropriate for now and, if applicable, that they can upgrade in the future.

The Need for Speed

If your clients are like Veruca Salt from the Willy Wonka movies, once they decide that they want something, they want it now.  Your customers may understand that developing that order tracking system to spec takes time.  Unfortunately, they still want it faster than you can produce a custom software system from scratch.

It’s an entrepreneurs job to channel McGyver when necessary, so think about ways to get around “recreating the wheel” from scratch.  You have many opportunities to build efficiencies into your process and your options increase with every project.  Maybe you can save time by starting with an earlier program that tracked widgets for another customer.  Or, if you need to create custom widgets, can you customize an existing mold that you have created earlier?  By looking at your company’s big picture, you can shave time off of many projects.

Of course, you can also throw more workers at the project to get more done in less time, but this solution adds more expenses to your bottom line.

Think Not Cheap, but Value-Oriented….

By now, you’re probably recognizing that you can often tweak one element of the business triangle to get more mileage out of the others.  Project costs are no exception. 

If you cannot escape the need to bring in more programmers for that order tracking system, you might consider bringing in a talented intern from the local technical college.  Interns can handle the more repetitious tasks under the direction of your own trusted staff while adding valuable experience to their resumes.  Or, rather than bringing in more quality assurance testers, your customer may welcome the opportunity to get a sneak peek at an early version of their system while doing their own testing.  In addition to notifying you of any inaccuracies, they may even be delighted to get a jump start on data entry.

Naturally, you want to look at the cost of materials as well.  Any place that you can save is a win. While it’s nice to provide user documentation on 22-pound bright white paper, less bright 20-pound stock serves the purpose just as well.  In fact, you can avoid paper costs entirely with online documentation, just like the major players in the software industry.

There’s always a way around at least one constraint. View each customer demand as a fun puzzle that you need to solve.  Take a step back and let your natural dedication and creativity put the puzzle together, so that it fits customer needs while advancing your business.


7 Lies Entrepreneurs Tell Themselves

Posted on by Barry Moltz

Stocksy_txpd72b69c8tH5000_Small_100354In order to stay positive, entrepreneurs need to lie to themselves a lot. Unfortunately, this can get them in trouble when they have improbable expectations and surprising outcomes. Here are the 7 biggest lies and the truth about what to do instead:

  1. Sales will be better next month. Many entrepreneurs believe that sales will always increase in the future. They reason that with more revenue, there will be more profit. The truth is that they don't change their sales and marketing efforts to give their company a better chance actually increasing sales. To boost revenue, companies need to be there when customers want to buy. Only a systematic sales and marketing effort will accomplish this.
  2. The next big customer (or product or employee) will change their company forever. The belief is that the next big break will take their company to the next level. The truth is that progress in companies typically build slowly and success doesn't usually have a tipping point. Think about the essentially building blocks that will grow the company step by step.
  3. Big money means taking big risks. They read the urban folklore of the few who took big risks and made billions. The truth is that most people fail. The success in business comes from taking small steps, evaluating the results, and taking the next action.
  4. Competitors are slow. Many entrepreneurs think that their competitors are not innovative and can't react quickly. Tell that to Blockbuster and Borders. The truth is that there will always be a competitor thinking up a better mousetrap. The entrepreneur needs to know what their competitive advantage will be when that day comes.
  5. Keeping the financials in their head. Many entrepreneurs believe that they do not need to review their company financial statements. The truth is that most of the time  their expectations do not match what is actually going on. This is why it's important to read and understand these statements every month.
  6. Getting paid last in their business. They reason that they are investing in their company and this is how they justify living off of savings while running a start up. The truth is that if an entrepreneur does not draw a livable wage from their company, they have a hobby, not a business. Always include the owner's salary in the monthly budget.
  7. Being busy means being productive. Many entrepreneurs believe if they are busy at work then they must be adding to the value of the company. The truth is that with all the distractions and interruptions that can enter an entrepreneur's daily life, they need to be very disciplined that they focus on projects that will make a deep impact on the company. Pick the two things that need to get done today and complete them before starting any other task.

What lies do you tell yourself?  


Creative Ways to Get Cash to Run Your Business

There is very little that you can count on in business.  But one thing is universally true — banks and investors are the most interested in giving capital to the businesses that need it the least. Given this universal truth, how can small businesses get the capital that they need to operate and grow?  It may be time to open your mind to creative cash flow methods that can infuse your business with the money that you need when you need it.

Leverage Your Customers

One way to achieve financial fitness is by practicing what I call “cash flow yoga.”  Simply put, you need to find ways to take cash in quickly, while letting it out slowly.  Rather than making your products or deliveries up-front and then chasing down payment, why not flip that traditional formula on its head?  Move to a system where you pre-sell and then, fulfill product orders.  Or, if you sell services, ask your customers to reserve your time with an upfront deposit.

Pre-selling definitely improves your cash flow, helps you save time chasing down payments and helps to filter out deadbeats.  Moreover, it also teaches you a great deal about the popularity of your products, so that you know what and how much to produce — and what products to abandon.

If you think that customers will not welcome this approach, the right marketing can transform this strategy into a selling point. For example, I advised a woman selling organic cosmetics that using a “made to order” messaging would keep her from having to retain inventory and allow her to take payments, make the products and then, deliver them. 

Just be sure to know the laws about deposits in your jurisdictions, so that you know how long you have to deliver while being compliant.

Embrace Gift Cards

??????????????????????????????????One major gift card vendor reports that consumers spend over $100 billion in gift cards each year.  And 72 percent of gift card holders spend more than the value on their cards.  But you do not have to be in the retail industry to benefit in this way.  Many businesses can boost their up-front cash by issuing gift cards or certificates.

Gift cards and certificates provide a win-win for you and your customers.  If you run a time-sensitive business like a tax accounting firm, pre-paid clients know that they lock in the knowledgeable support that they need during the busy tax season — and  if you combine the pre-pay strategy with a discount, even save money by paying upfront.  Not only does it provide a cash infusion into your business, you can better anticipate your future workload, so that you can plan resources effectively.

Before you start making these offers, however, you need to keep two important caveats in mind.  First, you need to review state and local laws to make sure that your strategy works for your business.  Additionally, pre-payments require different bookkeeping practices.  When you sell gift cards, they represent liabilities to your business.  Once you deliver the products or services, they become revenues.

“Kick Start” Some Cash

You may not know the term, “crowdfunding,” but you probably recognize the name Kickstarter, which is one of the most popular sites used by people looking for financial “backers” for their new projects and products.  Although there have been recent legislation changes around crowdfunding equity, there are many crowdsourcing platforms that allow you to seek contributions in exchange for providing perks and benefits to your sponsors.  For example, a $100 sponsor for your flying widget might receive a widget once they are produced.  $250 sponsors might also see their names on the packaging.

If you need additional cash to bring a product to market, crowdsourcing sites like Kickstarter and Indiegogo may be the right solution.  But, unless you get enough pledges, you will not obtain the funding you need, so you need to actively promote your listing.  Too many entrepreneurs think that if they build it or list it, that sponsors will just line up.  This isn’t the case- you need to take an active role to make sure that your project is fully funded. Get your friends and family involved in your project, and then make liberal use of Twitter, Facebook and other social media to let the world know where to go to learn more and sponsor your project.

Also, the more excitement you create, the more involved your sponsors become.  Consider fun and informative videos, creative perks and fun descriptions that create engagement.  If you do it right, you may get more than money- sponsors may even make suggestions on how to improve on your original concept or share new product benefits that will improve your marketing.  The advantage is that small business owners can gain financial and collaborative benefits from their sponsors without giving up ownership in their companies.

Banks aren’t always waiting in the wings to help fund small businesses, but that’s no reason to throw in the towel.  Your entrepreneurial spirit and some out-of-the-box thinking can go a long way to help supplement your cash.


Mondays with Mike: Sure-Fire Techniques For Cutting Costs

Every entrepreneur knows that minimizing expenses is essential to maximizing profit, but we don’t always know how to go about cutting costs – especially for big ticket items.  The longer I’m in business, the more I realize that paying full price for something is rarely necessary.  Here’s my list of tactics to avoid spending more than you have to:

  1. Buy generic.  Whether you’re talking about antibiotics or office equipment, insisting on a brand name will nearly always cost you more.  Shopping based on reviews, rather than name recognition will get you better quality for a better price.
  2. Borrow.  Look around your office, and I guarantee you’ll find a piece of equipment that you don’t use very often.  Whether it’s a box truck that you use twice a year, or whether it’s a fancy printer/scanner/copier that you only use to do your quarterly newsletters, examine your purchases and find someone to lend you the big-ticket items that you only need infrequently.
  3. Lease.  For seriously big-ticket expenses, especially those that you only plan to keep for a short while, or will incur significant maintenance charges, you should consider whether a lease is a good option.  If you must have a late model car, but you don’t need to put lots of miles on it, then a lease may be ideal.  Large office equipment can be cheaper to lease than purchase as well.
  4. ??????????????????????????????????????????Be patient.  We often don’t realize it, but a lot of purchases are made because of emotional, rather than practical reasons.  If you force yourself to sleep on a decision, you’re taking emotions out of the equation, and you’ll find that you frequently choose not to buy after all.  Make yourself wait, and you’ll inevitably save money.
  5. Barter.  Trading your unique skill set for talents you don’t possess is one of the best ways to save money – and strengthen community ties as well.  Trading your pizza shop’s delicious fare for business card printing services can benefit everyone involved with very little outlay of cash.  While you used to be limited to your immediate community to make bartering practical, there are now websites like TradeAway and BarterOnly that facilitate trading using sitewide credits so that you don’t have to find someone who needs exactly what you have to offer in order to get what you’re looking for.
  6. Buy used.  Products start depreciating as soon as you purchase them, and finding lightly used alternatives can save you a boatload.  If you’re savvy, you can often even find products that are still under warranty, and you may even find ones that are sold with an extended warranty that protects your investment. 
  7. Share.  Whether it’s infrequently used equipment or facilities like break rooms in your office space, if you look hard enough, you’ll find that you and other businesses are spending far more than you should on things you don’t use very often.  Working with folks in close proximity and finding the ways in which you’ve duplicated purchases can clue you in to options for making more efficient use of items you can share.  Think about negotiating a lease at a lower rate for shared restrooms on your floor, rather than several individual ones, or sharing a microwave or refrigerator with your neighbors in the office building.

I’ve always admired entrepreneurs who find innovative ways to spend less, and I constantly strive to be a better penny pincher when I can.  I don’t advocate cutting corners or sacrificing quality where it matters, but I do suggest taking a look at your business and identifying areas where you’re spending more than you have to.


Are You Keeping Score?

Stocksy_txp79d51f4dtW4000_Small_126195Some business people want to prevent losing by not keeping score, by ignoring the results, or by constantly moving the targets.

When my sons were introduced to baseball as small boys, the league prohibited officials from keeping score because they did not want the children to become too competitive at such an early age. League leaders wanted to emphasize the spirit of playing the game and having fun over winning or losing.

This did not work out the way the league planned. All the children on the team who knew how to count were keeping their own score. They knew who was winning! More importantly, they understood that a key part of the game is knowing how to win and to lose.

In winning, you can celebrate with your team members. You are elated because your hard work achieved the goal. In losing, you console yourself along with the team. The next steps are to learn what to do better, shake it off, and vow to return the next time to try again.

It’s important to know the score and declare winners and losers. A recent Ohio High School Hockey championship game was halted after seven overtimes and a 1-1 tie. State officials declared co-champions which angered a lot of players and fans. There was no postgame trophy ceremony because there was only one set of championship hardware. The players took turns posing for pictures with the lone trophy. In ended in a totally unsatisfying experience for both teams.

Many small business owners move their stated targets and goals so they don’t have to admit defeat. This happens during the budgeting process. The company will set a financial goal for the year, but when they start to miss this target, they change the budget. They hate to be wrong so they move the goal to a place they can make it. Similar, objectives are established for employee bonus pay, but when the target is missed, some companies award them anyways because of effort.

Both these examples defeat the purpose of setting a budget or establishing a bonus. Business people learn quickly that winning is a lot more fun and profitable. Learning what it feels like to lose is critical because that will incent everyone involved not to repeat it.

If your company never loses, how can they really appreciate winning?


Mondays with Mike: Secret Short Cuts – Legal Aid

What’s the difference between a bad lawyer and a good lawyer?  A bad lawyer can drag a case out for years.  A good lawyer can make it last even longer.

All kidding aside, legal fees aren’t necessarily the first thing entrepreneurs think of when they’re adding up the costs of doing business.  As litigious as society is, though, you’re foolish if you don’t engage an attorney to ensure that you’re legit and covered in case of legal action.  Don’t have the $350/hour lying around to consult a lawyer?  Keep reading.

Here’s my secret for low (or no) cost legal aid.  Head to a local university and talk to the head of the legal department.  Offer your business up for use by students (under the professors’ supervision, of course) as a real-life example.  Your business and its legal needs become coursework for up-and-coming attorneys.  There aren’t many situations in business that are truly win-win, but this is one of them.  Students benefit from concrete experience, rather than boring hypotheticals, and you get your legal work done for free.  Professors love it; students benefit; you save big bucks.

????????????????????????????????????????????????Rather than trying to do it yourself with old legal documents that you dug up online (and which might be completely outdated,) you’re going to get cutting edge, custom work.  Students can draw up your incorporation paperwork, make sure your legal disclaimers are airtight, draft your employment contracts, and basically ensure that you’re covered and are in a position to head off most legal problems that could arise.

You’ll literally get thousands of dollars of work for free, and I strongly recommend thanking the classes who work on your case with pizza or coffee from time to time.

One final benefit from offering your business up to a college department is that you get a preview of the talent that’s emerging from your local universities.  In fact, one of the times that I approached the head of the legal department at my local college, the professor recommended that I work with his best student who was about to graduate.  The student prepared my contract, and the process served as a great extended interview.  I hired him after he graduated, and he ended up being one of my most valuable employees.

Now think a little bit bigger…let’s see how this little secret can work in other areas as well.  Are there marketing students in your area?  Students of web design, graphic design?  Think about all of the exciting, creative work you can cash in on while at the same time providing local students with exciting, valuable real-life experience – experience that they can use to get an edge on the fierce competition they’ll face once they’re out looking for work.  Don’t pass up a chance to get a great deal on the services your business requires, while fostering closer ties to your community and helping better prepare the workforce of the future.


How to Get In Bed with Your Banker

Stocksy_txpf799c772Ea3000_Small_104560Most small businesses still need banks. They provide valuable financial services daily for companies. Banks can still be a major source of capital for the promising business. How do you make sure that they are there when you need them? Get your business in bed with your banker! While this many not conjure up a pleasant image, it must be part of the strategy. Getting the banker to know your company’s capital requirements must be established far in advance of when you may need them. Here is what to do and why it works:

Establish yourself as a customer. Open checking and money market accounts at the bank. Use their merchant, ACH and wire services. Pay fees to use their services. Why it works: Bank employees are trained to help customers and you want to part of that group as soon as possible.

Go into the bank weekly. Be seen at the bank and get to know the branch manager and key staff. Visit at least a few times a month. Talk to them about the bank, their family and your business. Why it works: People do business with other people they know, like, and trust.

Participate in common community events. Go to the events that the banks sponsors locally. Show support for their causes. Get on joint committees. Why it works: You can demonstrate what it is like to work with you and share a common goal.

Share the progress of your company. Sit down with loan officers before capital is needed. Show them your sales and profit projections. Impress them with your knowledge of the financial statements. Revisit them when you make progress toward your goals. Why it works: Numbers are power. They are easy to take to a loan committee. Bankers trust business people that understand them.

Get a small loan. This may be a home equity loan (or similar secured asset) to be used by your company. Pay the loan back on time and then try to increase it. Why it works: This builds a reputable track record the bank can reference.

Keep your personal credit score high (as well and Dunn and Bradstreet number). Bankers like numbers that increase. Why it works: A high credit score will show that you can be trusted to borrow money. They believe that past performance predicts the future.

Bring more customers to the bank. Everyone loves referrals. Be responsible in helping the bank grow their business. Why it works: If you help them, they are more likely to help you.

Go for the big ask: It’s time to apply for the bigger loan for your company. This can be a term note or line of credit. Why it works: Because the bank now trusts you and your company.

How have you got a banker in bed with you to get a loan?




 
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