How should trends impact my business?

Predicting the future is one of humankind’s oldest endeavors. Nearly everything from tea leaves to caterpillars has served as a bellwether of fate. Twenty-first Century small business owners can draw on a host of technology and information resources to chart the course of their enterprises. But given the increasing pace and unpredictability of change, one can’t help but wonder if those caterpillars might really know something.

Anticipating trends can be extremely valuable in keeping you current on everything from sales strategies and customer desires to technology tools and the general economy. As your business grows, change will be inevitable and small business owners should constantly look ahead and seek out ways to shake things up. The more you test the winds of change, the better your chances of success down the road.

But how can you tell the difference between a fleeting fad and a true trend? Louis Patler, a market research guru for companies such as American Express and Dell, has spent decades tracking emerging trends and studying their impact on business. He says the key to successfully piloting a business in the years ahead will be embracing new ways of thinking.

For example, Patler says that truisms like “stick to what your business does best” are outmoded. If you want your business to grow, consider that past business traditions and processes might only hold you back. Trying new approaches is vital.

Not all customers are created equal. Some are more valuable and loyal than others, and those are the ones you should lavish the most attention on with special savings and service offers. And don’t expect loyalty from employees. As American society becomes ever more mobile and labor shortages worsen, workers won’t stay on a job for more than three years.

Information is the key to success in the 21st Century, and the ability to effectively capture and analyze data on customer needs and behaviors is essential for small business owners to stay on top of and, even more important, anticipate trends related to their products of services. After all, what’s important to your current and potential customers will likely be important to you as well.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

What are the special considerations for family businesses?

The family business is an American small business tradition, one that gives parents, spouses, children, and others an opportunity to contribute to and share in a dream that can grow and prosper over many generations.

But without proper planning and management, family businesses can also be the source of contention, acrimony, and even irreparable harm to once-loving relationships. That’s why it’s important for aspiring entrepreneurs to fully understand the pros and cons of going into business with relatives and in-laws. The needs of the business may not always be compatible with family harmony, resulting in a situation that handled improperly, can jeopardize the survival of both.

When bringing family members into a business for the first time, especially as investors or in a startup situation, you should consider putting the business relationship in writing. Family members sometimes buy into the excitement of a business startup without a clear idea of their role once the business is underway.

In an ongoing family business, it’s important to treat family members fairly. While some experts advise against hiring family members, that sacrifices one of the great benefits of a family business. Countless small companies would never have survived without dedicated family members. But avoid favoritism. Pay scales, promotions, work schedules, criticism and praise should be evenhanded between family and non-family employees.

Don’t become the employer of last resort for every distant relation who calls. Base employment on the skills or knowledge they can bring to the business. If your kids will be joining the business, make them get at least three to five years business experience elsewhere first to help them gain perspective of how the business world works outside of a family setting.

Problems and differences of opinion are common in a family business, so it’s important to keep lines of communication clear. Weekly meetings to assess progress, air differences and resolve disputes work well for many family firms.

Just as solo entrepreneurs and non-related partners need to separate their business and personal lives, owners of family businesses need to prevent work-related issues from dominating family activities. While it may be difficult to totally confine shop-talk to the workplace, make it a standing rule not to discuss work and business issues at social gatherings or at designated “family times” where the focus should be on other things.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

How do I stretch my promotion dollars?

SCORE counselor Alan Yarnoff advises small business owners on how to stretch their promotion dollars.

Small business owners face a tough decision on how to best invest their promotion and advertising dollars in today’s economy. They operate with smaller marketing budgets against larger companies with greater funds and resources. However, all is not lost because there are many ways to draw attention to your business without overspending your budget.Some of the best strategies offer a very high ROI [Return on Investment] with very little capital outlay. For a relatively small financial investment and some of your time, you can get leading ads and promotions that will draw customers to your business and ring the cash registers.

Let's take a look at some of these options: Companies like McDonald’s advertise to create name recognition and future sales. A small business cannot afford to operate this way; they need to create advertising to produce immediate sales. To accomplish this, you must include a special offer in your advertising and an easy way for your customer to act on the offer. Think out of the box: always look for some unconventional marketing ideas your competitors are missing. This can lead to the discovery of some highly profitable ways to generate sales and avoid the competition. Reduce the size of your ads so you can increase the frequency without increasing your spending. On many occasions, if the message is on the target, the size of the ad will not determine its success or failure.Set up joint promotions with other non-competitive businesses. Offer to promote their products or services to your customers if they promote your products or services to their customers. This can generate incremental sales with very little investment by your company. Be the expert by offering seminars to help establish your business as the local source for the products or services you offer. Seminars can help cement relations with current customers, attract prospects, and increase your company’s identity in the community.One last point, make sure your selling materials are professionally created. Every brochure, flyer, email blast, ad, and mailer should be competently produced. Do not cut corners; this may be the final element in a successful sale or lost customer.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

How do I determine the price for my products/services?

Many entrepreneurs frequently struggle with setting a fee schedule for their work. While it’s tempting to set a low price and cut profit in order to lure customers, this strategy will almost always backfire. Some customers may resist your attempts to increase prices later on, while others will be suspicious of what they are receiving for such a great price.

Trade journals and professional organizations often publish baseline rates and fees on a national, regional or local basis. Networking with other entrepreneurs can be instructive, although some may be justifiably reluctant to discuss their fees with potential competitors. You also want to learn the rationale behind various price structures to arrive at appropriate rates for your customers.

A good starting point is to set an hourly rate. As you gain experience, you’ll be able to set flat fees based on the amount of work, supplies and other resources that a job will require. Often rates can reflect what a company would pay someone with your skills to do the same kind of work in house.

Say a comparable full-time position for your service pays $30,000 a year. Dividing that figure by 2,000 (approximately 40 hours a week for 50 weeks) results in $15 per hour of straight pay. Next, add a percentage to cover the cost of fringe benefits that employers normally pay (such as Social Security and unemployment and health insurance). Generally, fringe benefits equal one-third of an employee’s pay. Then figure a percentage for your overhead costs: office space, equipment, supplies, vehicles and time devoted to business development and research. Fifteen percent is a common premium.

Next, consider your profit margin, such as 15 percent, for funding capital investments or future growth, and surcharges for time-sensitive assignments that may require extra effort or rescheduling on your part. Other variables that influence your prices may not become apparent until after you have been in business for some time.

Regardless of how you set a price schedule, make sure that you and your customer agree on the fee up front, especially if expenses and surcharges are involved. If the customer wants to negotiate, weigh the pros and cons of a lower fee. Is this a one-time project or the beginning of a steady stream of work? Does the client have a reputation for reliability? Will you still be able to cover your costs of doing business?

By the same token, you may develop a strong enough relationship with your regular customers to confidently offer a discount in return for a larger volume of work. Just be sure that this discount does not cut into your profit margin, and that the advantage of staying busy does not limit your ability to attract other, potentially more lucrative assignments.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

What are the best time management technques?

Time is the one resource that most small business owners wish they had more of. But until someone figures out how to make days last longer than 24 hours, entrepreneurs must be content with learning how to sharpen their time management skills.

Fortunately, one of the most effective time management tools is also the simplest—the basic “To-Do” list. Each day, jot down all of the things that need to get done, all on one sheet of paper.

You can also number or check the ones that are highest priority “must-do” items. As tasks are completed, cross them off. This can help you focus on getting them done one at a time, and also gives you a sense of accomplishment. To add a technology flavor to tracking your tasks, TimeTiger.com provides a web-based to-do list that helps you monitor your project and non-project activities.

Delegating more work can also help ease your time crunch. Many business owners accustomed to “doing it all” find this exceedingly difficult. But even if you are a sole operator, you can pass off tasks to others, via outsourcing, for example, to free up time for yourself.

Periodically analyze how time is spent at your business—and not just your time, but everyone’s. Divide the day into small time blocks and record what you, or others, were doing in each block. Now compare this real use of time to your goals, expectations and mission priorities. If they do not align, you’ll need to take action. And remember that growing, successful businesses don’t put things off. Even a simple “no” response to something on your to-do list can extinguish that item and let you move on.

A variety of technology solutions are also helping small businesses track and manage time. For example, Workarea.com is an Internet-based time tracking system that can provide billing information up to the second. The system includes a time clock, time sheet, expense tracking, address book and the ability to access it all via cell phone or PDA.

For businesses with employees, the TimeClock Plus Small Business Edition at www.timeclockplus.com lets you turn any PC into a time clock. Employees can sign in or out with the keyboard or mouse, and easily allocate hours and costs to specific jobs.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

Is venture capital financing right for my business?

In assessing options for financing a new small business, many entrepreneurs look to venture capital. This approach can benefit a relatively unproven enterprise that appears to have a promising future. Securing this type of funding is not easy, however. Venture capital firms expect a business to return their investment with interest plus a large profit. And after the disappointments with many tech-sector companies in recent years, venture capital providers are particularly wary about where they invest.

Many venture capital firms are affiliated with banks, insurance companies, other financial institutions and large corporations. Some are owned by individuals or private groups of investors; others are publicly held. The minimum investment is generally from $50,000 to $500,000, but investment ceilings are almost unlimited.

The interest of a venture capital firm in a small business usually depends on the stage of the new firm’s development. An investor may be interested only after the new firm has established itself and has a working organizational structure, a viable business plan and start-up arrangement. However, some firms prefer to come in at a later stage—perhaps when the new company is in its second or third round growth stage and needs more capital either to carry out expansion plans or to tide it over until a merger or public offering takes place.

A company’s business plan serves as the primary analytical tool for the interested venture capital investor. In analyzing the plan, investors have three specific concerns:
1) The product or service. Investors seek product or service innovations that give the company a strong competitive advantage. A new idea, backed by market surveys (measuring the appeal of the product or service and its potential market), may be appealing to investors.
2) Management capability. No matter how good the product or how innovative the service, the quality and experience of the management are key factors in the success of the business. The astute investor looks for solid evidence of such management skill.
3) The industry’s growth potential. Investors also want to be sure that the product or service is in a growth field. A significant or revolutionary product improvement may nevertheless lack luster in a declining product or service category.

Most venture capital investors purchase common or convertible stock rather than burden the fledgling enterprise with interest payments on debt or debentures. They may want more than 50 percent ownership. Additionally, while investors may insist on a position on the board of directors or expect to give management and technical advice, they are rarely interested in day-to-day management issues unless the survival of the business and their investment are at stake.

Before taking the next step for obtaining venture capital, get outside advice. Talk with your accountant and tax advisor.

Richard Strug

How can I make my business more efficient?

Gerald Bose, SCORE counselor and past vice president, shares his expertise in the area of Process Improvement.

Many organizations are seeking ways to reduce waste and become more efficient. The automotive and financial industries in the U.S., in particular, have realized significant process improvements throughout the 1990s. However, they grew complacent in the 21st Century and curtailed their improvement efforts. Today, companies like GM, Chrysler and Citibank face acquisition by competitors or bankruptcy.

Now, a variety of small businesses are successfully improving their processes and becoming more productive, agile and competitive.

A process is simply a series of steps and decisions performed in a way to accomplish a work product. Virtually everything we do in life involves processes. Examples of processes that can be found anywhere are: producing invoices, taking an order, preparing a lunch order or confirming customer appointments.

Process improvement is a series of actions taken to identify, analyze and improve existing processes within an organization to meet goals and objectives. This means setting aside past practices of assigning blame or being reticent to change because “we’ve always done it this way”. Sometimes the biggest change is to stop fighting fires or managing crises and learn to find ways to do your work better.

We need to find the root causes of problems in order to fix what is broken. Occasionally, Murphy’s Law will rear its ugly head and our process improvement efforts may actually make things worse. Don’t despair because Rome wasn’t built in a day. Sometimes, we have to take a step back before we can take two steps forward.

The basic process improvement model follows the proven Plan-Do-Check-Act (PDCA) Cycle. First, identify the root causes of problems with the selected process. Plan how and what to do to improve the process. Often diagramming the steps and decisions involved can help visualize the problem better and pose viable solutions. Next, implement or Do the changes you planned in a pilot or on a smaller scale. Check to see that fixes are working and effective. Act to make the fixes standard and part of the revised work policy or repeat the previous steps to discover alternate solutions.

So, whether your business is in the start-up phase or has been an on-going entity for years, it can benefit from process improvement. Apply the key process improvement steps to a business function you believe needs tweaking to see what you learn. By continually improving your internal business processes your company will not only survive but it will thrive.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties