Abraham Cohen, SCORE counselor, shares with us his thoughts on managing your inventory. There is a saying “inventory can make you or break you.” If it is too high, it ties up working capital and cash flow; too low, it may cost you sales. The right balance is easier said than done. Forecasting sales, market conditions, and deliveries may require a crystal ball. Inventory control is not a perfect science. However, the following principles, when applied, will get you close to optimum levels.
- Frequent Inventory Analysis: Use a computer program that matches your needs. Create your own program, buy a ready-made one, or hire the services of a programmer. If you are using QuickBooks for your accounting needs, they offer an inventory control add-on.
- Purchasing - Basic Factors: Months on hand; sales/lost sales; frequency (quarterly, bi-monthly, monthly, weekly or daily); vendors’ lead (delivery) time; safety stock to cover the unforeseen.
- Inventory Turns: Reorders per year. Example: monthly sales for item X is 20 (annual 240) – ordering 40 (2 months worth) every 2 months gives 6 turns; (240/40=6) – average monthly stock would be 20 (240/12). More turns, the leaner the inventory. Order timing is of the essence as well as adjustments for seasonal products.
- Vendor Lead Time: Order date to delivery. A 30 day delivery works fine for the above example, annual 240 and 6 turns. Order 40 units 6 times a year when your inventory is down to 20. Depending on the location of your vendor, domestic deliveries usually arrive in 30 days or less. Imported items can take up to three months or longer depending on the country of origin, trade agreements, location of the port, and inspections at both the shipping and receiving ports. Arranging for ‘Just in time’ delivery would be nice but many times difficult to forecast.
- Safety Stock: This factor is important especially when deliveries are unreliable. A 10 to 20% extra inventory cushion comes in handy, more so when sales are higher than forecasted. Lost sales and backorders hurt business and drive customers to your competitor. Incorporate the 10 to 20% into the purchasing formula.
- Computer Program Data: Above are basics to formulate a purchasing program. They are not universal. Different businesses require different data for their computer systems. The system will work only as well as the data entered: “Garbage in – Garbage Out.”
No computer program can claim perfection. Checking the numbers before placing the order will prevent nasty surprises. An experienced purchasing agent must know the items and have a working knowledge of your business. And remember, inventory = $$$$$$ already spent.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Wednesday, March 25, 2009
Tuesday, March 17, 2009
How do I keep my service customers?
Customer confidence is important to every successful small business, but particularly to those that offer services. Here, the customer’s satisfaction determines whether you cultivate loyalty or an unfavorable reputation through word-of-mouth.
The foundation of this confidence is quality. The typical customer knows little about the technical side of your business and therefore judges your business solely on results. For others, it’s the courtesy and integrity of you and your staff. Never assume things are satisfactory. Continually monitor your operations and competition to be sure you are staying on top of your customers’ needs.
For example, evaluate the price range for services offered by competitors, determine how and why they arrived at that price schedule, and make sure your prices are reasonable and reliable. Provide each customer with a comprehensive bill that breaks out specific charges.
Train your employees to be patient with all customer questions. Be sure there are clear policies in place to address service errors, complaints and discounts. Train your employees to handle such situations and to know at what point complaints should be directed to you. Not even a loyal customer appreciates getting the runaround.
In all customer dealings, honesty is the best policy. No one likes to hear that a service problem has not been solved or that the resolution will take longer than expected. Be as specific as possible, but leave room for unforeseen problems such as receiving the wrong part or an employee’s personal emergency. And if a delay is unavoidable, notify the customer right away.
If you would like to discuss this topic or business planning, business growth strategies or a specific business issue, contact us at 609-393-0505 or email us at info@scoreprinceton.org.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
The foundation of this confidence is quality. The typical customer knows little about the technical side of your business and therefore judges your business solely on results. For others, it’s the courtesy and integrity of you and your staff. Never assume things are satisfactory. Continually monitor your operations and competition to be sure you are staying on top of your customers’ needs.
For example, evaluate the price range for services offered by competitors, determine how and why they arrived at that price schedule, and make sure your prices are reasonable and reliable. Provide each customer with a comprehensive bill that breaks out specific charges.
Train your employees to be patient with all customer questions. Be sure there are clear policies in place to address service errors, complaints and discounts. Train your employees to handle such situations and to know at what point complaints should be directed to you. Not even a loyal customer appreciates getting the runaround.
In all customer dealings, honesty is the best policy. No one likes to hear that a service problem has not been solved or that the resolution will take longer than expected. Be as specific as possible, but leave room for unforeseen problems such as receiving the wrong part or an employee’s personal emergency. And if a delay is unavoidable, notify the customer right away.
If you would like to discuss this topic or business planning, business growth strategies or a specific business issue, contact us at 609-393-0505 or email us at info@scoreprinceton.org.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, March 3, 2009
What's the value of a business mentor?
Often the smartest people are the ones who know they don’t know it all. Like it or not, a business of your own exposes you to duties, situations, problems and opportunities you may never before have faced. Is it time for you to get a mentor?
A mentor is an experienced business adviser who is willing to share information and insights on a regular basis. If you worked in a corporate environment before going out on your own, you’re probably familiar with the concept of a senior manager in the organization mentoring a younger one. Some companies have even formalized their mentoring program. In your own business, however, of necessity your mentor will come from outside.
If you are seeking a mentor, it makes sense to start by looking for experienced business professionals in the same business or industry as your own company. Ideally the one you want will already know something about your work and management style. Over your entrepreneurial career, you may even have a succession of mentors.
What does a mentor contribute to your growth as a business owner? First of all, he or she helps speed up your learning in vital areas of your business. This individual is not afraid to share personal experiences with you as well as expertise. But there are other advantages. A mentor
helps you avoid isolation, by becoming a “trusted other” in which to confide your uncertainties as well as your breakthroughs. A good mentor lends perspective, reminding you to “keep your eye on the doughnut and not the hole”; supplies the candid, honest feedback you may not be getting from your employees; and provides moral support for the tough decisions you have to make in your business.
Not so very far down the road, you will be ready to mentor individuals who are where you were only a year or two ago. You may be pleasantly surprised to see how this accelerates your own learning and growth as an entrepreneur. You then become a contributor to the business community in the same way your mentor was to you.
In short, mentoring is a relationship that will pay dividends for both you and the individual who mentors you. Finding the right mentor could be one of the most important ways you help your business to succeed.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
A mentor is an experienced business adviser who is willing to share information and insights on a regular basis. If you worked in a corporate environment before going out on your own, you’re probably familiar with the concept of a senior manager in the organization mentoring a younger one. Some companies have even formalized their mentoring program. In your own business, however, of necessity your mentor will come from outside.
If you are seeking a mentor, it makes sense to start by looking for experienced business professionals in the same business or industry as your own company. Ideally the one you want will already know something about your work and management style. Over your entrepreneurial career, you may even have a succession of mentors.
What does a mentor contribute to your growth as a business owner? First of all, he or she helps speed up your learning in vital areas of your business. This individual is not afraid to share personal experiences with you as well as expertise. But there are other advantages. A mentor
helps you avoid isolation, by becoming a “trusted other” in which to confide your uncertainties as well as your breakthroughs. A good mentor lends perspective, reminding you to “keep your eye on the doughnut and not the hole”; supplies the candid, honest feedback you may not be getting from your employees; and provides moral support for the tough decisions you have to make in your business.
Not so very far down the road, you will be ready to mentor individuals who are where you were only a year or two ago. You may be pleasantly surprised to see how this accelerates your own learning and growth as an entrepreneur. You then become a contributor to the business community in the same way your mentor was to you.
In short, mentoring is a relationship that will pay dividends for both you and the individual who mentors you. Finding the right mentor could be one of the most important ways you help your business to succeed.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, February 24, 2009
How do federal laws on employment verification affect me?
Our chapter’s resident expert on employment issues, Yan Bennett, shares her thoughts on federal regulations on employer requirements in verifying the work eligibility of employees. Yan Bennett is an attorney and counsels small business owners on various state and federal requirements.
Recently, the federal government proposed changes to regulations governing verification of employee work authorization, or what Human Resources personnel know as Form I-9 Employment Eligibility Verification. These changes include amending the acceptable identity and employment authorization documents employees may present to their employers, disallowing employers to accept expired documents to verify employment authorization on the Form I-9, and proposing changes to the Form I-9 itself.
However, during the public comment period, which was to conclude on February 2, the federal government received comments from employers requesting an extension of the effective date of the rule to address procedural and substantive concerns the new rule raises. Commentators noted that without proper guidance, the new rule, as proposed, would present exceptional burdens and costs to employers in using the new form and instructions. The interim final rule and an informational copy of the revised Form I-9 are available for public comment at http://www.regulations.gov/ until April 3, 2009.
The imposition of this new interim rule may result in a cost of an aggregate $100 million to businesses in the first year that the new form is used. The government considers this initial cost to be a non-reoccurring in that most of the costs are associated with familiarizing Human Resources and personnel with the new requirements, and transitioning to the new forms. However, failure to comply with the employment eligibility verification requirements may result in the imposition of civil penalties of several hundred to several thousand dollars per employee. Thus, the total cost of the new rule and form may well be unknown. Thus, employers are highly encouraged to familiarize themselves with the new regulation before it becomes effective for a smooth transition.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Recently, the federal government proposed changes to regulations governing verification of employee work authorization, or what Human Resources personnel know as Form I-9 Employment Eligibility Verification. These changes include amending the acceptable identity and employment authorization documents employees may present to their employers, disallowing employers to accept expired documents to verify employment authorization on the Form I-9, and proposing changes to the Form I-9 itself.
However, during the public comment period, which was to conclude on February 2, the federal government received comments from employers requesting an extension of the effective date of the rule to address procedural and substantive concerns the new rule raises. Commentators noted that without proper guidance, the new rule, as proposed, would present exceptional burdens and costs to employers in using the new form and instructions. The interim final rule and an informational copy of the revised Form I-9 are available for public comment at http://www.regulations.gov/ until April 3, 2009.
The imposition of this new interim rule may result in a cost of an aggregate $100 million to businesses in the first year that the new form is used. The government considers this initial cost to be a non-reoccurring in that most of the costs are associated with familiarizing Human Resources and personnel with the new requirements, and transitioning to the new forms. However, failure to comply with the employment eligibility verification requirements may result in the imposition of civil penalties of several hundred to several thousand dollars per employee. Thus, the total cost of the new rule and form may well be unknown. Thus, employers are highly encouraged to familiarize themselves with the new regulation before it becomes effective for a smooth transition.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Thursday, February 19, 2009
Do I have what it takes to be an entrepreneur?
While almost never asked explicitly in SCORE counseling sessions, Bill Litchman, SCORE counselor, explains in his following article an underlying concern of each of our clients, “Do I have what it takes to be a successful entrepreneur or small business owner?” First, we need to understand the differences between the two. While there are many similarities, there are a few notable divergences.
True entrepreneurship entails substantial innovation providing the venture with a unique competitive edge leading, if successful, to significant wealth creation over a relatively short period of time and, therefore necessitating significant financial risk to both the entrepreneur and other investors. The entrepreneur is a leader with an enthusiastic vision and the ability to drive the enterprise intellectually and convince outside investors and potential employees of the value and uniqueness of the idea. The entrepreneur does not need to be “chief cook and bottle washer” of the enterprise but needs to recognize her/his weaknesses and compensate with outside talent.
The Small Business Owner also needs perseverance and drive; and every start-up necessitates financial risk and anticipates financial rewards. However, the small business owner is chief cook and bottle washer and needs to understand, with some degree of detail every aspect of her/his business including leadership, sales & marketing, how to read financial statements, potential legal ramifications and, as appropriate purchasing, inventory control, web site development and on and on. Usually, the small business owner is seeking to realize her/his dream with contained financial risks while earning a steady and growing income. The entrepreneur bets the farm, the small business start-up does not; but both need that all important business plan.
For both the entrepreneur and small business owner, the words of Frank Lloyd Wright apply: “I know the price of success: dedication, hard work and an unremitting devotion to the things you want to see happen.” And, both need to understand fully the concept behind the words of Arie de Geus: “Your ability to learn faster than your competition is your only competitive advantage.”
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
True entrepreneurship entails substantial innovation providing the venture with a unique competitive edge leading, if successful, to significant wealth creation over a relatively short period of time and, therefore necessitating significant financial risk to both the entrepreneur and other investors. The entrepreneur is a leader with an enthusiastic vision and the ability to drive the enterprise intellectually and convince outside investors and potential employees of the value and uniqueness of the idea. The entrepreneur does not need to be “chief cook and bottle washer” of the enterprise but needs to recognize her/his weaknesses and compensate with outside talent.
The Small Business Owner also needs perseverance and drive; and every start-up necessitates financial risk and anticipates financial rewards. However, the small business owner is chief cook and bottle washer and needs to understand, with some degree of detail every aspect of her/his business including leadership, sales & marketing, how to read financial statements, potential legal ramifications and, as appropriate purchasing, inventory control, web site development and on and on. Usually, the small business owner is seeking to realize her/his dream with contained financial risks while earning a steady and growing income. The entrepreneur bets the farm, the small business start-up does not; but both need that all important business plan.
For both the entrepreneur and small business owner, the words of Frank Lloyd Wright apply: “I know the price of success: dedication, hard work and an unremitting devotion to the things you want to see happen.” And, both need to understand fully the concept behind the words of Arie de Geus: “Your ability to learn faster than your competition is your only competitive advantage.”
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Monday, February 9, 2009
What are the most common pitfalls in a recession?
Entrepreneurs face challenges on many fronts, including lower consumer spending, rising unemployment and tightening credit. Inflation pressures have hit both businesses and customers. By acting quickly and decisively to protect their business today, local business owners can make it through the recession with a profitable business.
SCORE CEO Ken Yancey says, "Small businesses feel the credit crunch first. We have seen difficulty accessing capital and collecting payments from customers." Yancey adds, "Don't wait. Now is the time to meet with a SCORE mentor to make plans to tighten credit policies, cut expenses and look at holding cash in your accounts. Experienced SCORE mentors are here to help you plan actions to survive the recession and grow when the economy turns around."
SCORE CEO Ken Yancey says, "Small businesses feel the credit crunch first. We have seen difficulty accessing capital and collecting payments from customers." Yancey adds, "Don't wait. Now is the time to meet with a SCORE mentor to make plans to tighten credit policies, cut expenses and look at holding cash in your accounts. Experienced SCORE mentors are here to help you plan actions to survive the recession and grow when the economy turns around."
SCORE offers tips for small business owners on Five Recession Pitfalls to Avoid:
1. Cutting expenses too slowly. Don't cut expenses a little bit at a time. Now is the time to look at expenses and decide whether your company needs to cut expenses five, 10 or up to 20 percent. Do what it takes early in the year and bring costs down.
2. Maintaining the same product and service mix. Your needs are changing. You can bet your clients needs have changed too. Call your existing clients and ask them what they need. Then, design your product service mix around those needs.
3. Reducing marketing instead of focusing on marketing. The company that stands tall, strong and visible in the marketplace has stature and status. Differentiate with strong marketing to drive leads and sales.
4. Lacking systems to free up your time. Streamline your business and become more efficient. Use a handheld organizer to keep track of phone numbers, dates, appointments and meetings. Set a time each week to handle routine tasks, bills and paperwork.
5. Keeping everything to yourself. Your team knows the economy is tough and wants to understand what the company is facing and how, together, you can make it through. Lead toward a brighter future by focusing your efforts on today.
Richard Strug
Monday, February 2, 2009
Wjhat structure is best for my business?
You may operate your business under one of many organizational structures generally chosen for liability and tax reasons. The most common organizational structures for “for profit” businesses are sole proprietorships, general and limited partnerships, “C” and “S” corporations, and limited liability companies.
Each structure offers unique tax and liability benefits appropriate for different personnel situations. If you’re uncertain where to start, contact SCORE for free counseling and your attorney and accountant for assistance. Here's an overview get you started:
Sole Proprietorship – One person operating a business as an individual is a sole proprietorship. It is the most common form of business organization. Profits are taxed as income to the owner personally. The personal tax rate is usually lower than the corporate tax rates. The owner has complete control of the business, but faces unlimited liability for its debts. There is very little government regulation or reporting.
General Partnership – A partnership exists when two or more persons join together in the operation and management of a business. Partnerships are subject to relatively little regulation and are fairly easy to establish. A formal partnership is recommended to address potential conflicts such as who will be responsible for performing each task; what, if any, consultation is needed between partners before major decisions, what happens when a partner dies, and so on. Under a general partnership each partner is liable for all debts of the business. Profits are taxed as income to the partners based on their ownership percentage.
Limited Partnership – Like a general partnership, this is established by an agreement between two or more individuals. However, there are two types of partners.
· A general partner has greater control in some aspects of the partnership. For example, only a general partner can decide to dissolve the partnership. General partners have no limits on the dividends they can receive from profit so they incur unlimited liability.
· Limited partners can only receive a share of profits based on the proportional amount on their investment, and the liability is similarly limited in proportion to their investment.
“C” Corporation – A “C” corporation is a legal entity made up of persons who have a charter legally recognizing the corporation as a separate entity having its own rights, privileges, and liabilities, apart from those of the individuals forming the corporation. It’s the most complex form of business organization and is comprised of shareholders, directors, and officers. The corporation can own assets, borrow money, and perform business functions without directly involving the owners. Corporations are subject to more government regulation and have the advantage of limited liability, but not total protection from lawsuits.
Subchapter “S” Corporation – This is a special section of the Internal Revenue Code and permits a corporation to be taxed as a partnership or sole proprietorship, with profits taxed at the individual, rather than the corporate rate. A business must meet certain requirements for Subchapter “S” status. Contact SCORE for free counseling, the IRS, and your accountant for additional information.
LLCs and LLPs – The limited liability company is a popular business form. It combines selected corporate and partnership characteristics while still maintaining status as a legal entity distinct from its owners. As a separate entity it can acquire assets, incur liabilities and conduct business. It limits liability for the owners. LLC owners risk only their investment, not personal assets. The limited liability partnership is similar to the LLC, but it is aimed at professional organizations.
Contact SCORE for information concerning organizational structures for non-profit organizations.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Each structure offers unique tax and liability benefits appropriate for different personnel situations. If you’re uncertain where to start, contact SCORE for free counseling and your attorney and accountant for assistance. Here's an overview get you started:
Sole Proprietorship – One person operating a business as an individual is a sole proprietorship. It is the most common form of business organization. Profits are taxed as income to the owner personally. The personal tax rate is usually lower than the corporate tax rates. The owner has complete control of the business, but faces unlimited liability for its debts. There is very little government regulation or reporting.
General Partnership – A partnership exists when two or more persons join together in the operation and management of a business. Partnerships are subject to relatively little regulation and are fairly easy to establish. A formal partnership is recommended to address potential conflicts such as who will be responsible for performing each task; what, if any, consultation is needed between partners before major decisions, what happens when a partner dies, and so on. Under a general partnership each partner is liable for all debts of the business. Profits are taxed as income to the partners based on their ownership percentage.
Limited Partnership – Like a general partnership, this is established by an agreement between two or more individuals. However, there are two types of partners.
· A general partner has greater control in some aspects of the partnership. For example, only a general partner can decide to dissolve the partnership. General partners have no limits on the dividends they can receive from profit so they incur unlimited liability.
· Limited partners can only receive a share of profits based on the proportional amount on their investment, and the liability is similarly limited in proportion to their investment.
“C” Corporation – A “C” corporation is a legal entity made up of persons who have a charter legally recognizing the corporation as a separate entity having its own rights, privileges, and liabilities, apart from those of the individuals forming the corporation. It’s the most complex form of business organization and is comprised of shareholders, directors, and officers. The corporation can own assets, borrow money, and perform business functions without directly involving the owners. Corporations are subject to more government regulation and have the advantage of limited liability, but not total protection from lawsuits.
Subchapter “S” Corporation – This is a special section of the Internal Revenue Code and permits a corporation to be taxed as a partnership or sole proprietorship, with profits taxed at the individual, rather than the corporate rate. A business must meet certain requirements for Subchapter “S” status. Contact SCORE for free counseling, the IRS, and your accountant for additional information.
LLCs and LLPs – The limited liability company is a popular business form. It combines selected corporate and partnership characteristics while still maintaining status as a legal entity distinct from its owners. As a separate entity it can acquire assets, incur liabilities and conduct business. It limits liability for the owners. LLC owners risk only their investment, not personal assets. The limited liability partnership is similar to the LLC, but it is aimed at professional organizations.
Contact SCORE for information concerning organizational structures for non-profit organizations.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
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