Zane Safrit

Credit Crunch: Does it impact small business?

NO: National Federation of Independent Business and its chief economist, William Dunkelberger, says:

...the crisis on Wall Street hasn't hit Main Street.    

"I would just point out that after the 22 percent (stock market) decline we had in 1987, it didn't. The economy just kept right on growing," he said.

Q: Is there a Main Street credit crunch right now?

A: We don't have any evidence that's that happening either.

- Reuters: Main Street Spared?- September 18, 2008

YES:  Wall Street Journal, Small Firms Dig for Funding - September 19, 2008

Small companies, which lean on debt to fund growth and working capital, are scrambling to come up with alternatives to banks. But many of the alternative lenders ask for assets or accounts receivable as collateral. Some small companies may be forced to give up a chunk of equity in exchange for cash. And interest rates may be 15% or more, depending on the borrower's size and prospects.

In a recent survey by the Federal Reserve Board, 65% of large banks said they had tightened standards on loans to small businesses in the three months ending in July.

Does one day make a difference?

What's your story?

How does the credit crunch, credit crisis, we see in the news today, impact your small business? How?

Does it impact your community's small businesses?

Link from Rex Hammock on twitter.

Small Business...Build an Ark

It's reported on one of the world's earliest blogs, The Bible, that God told one of, the only(?), high-level enduser named Noah...to Build an Ark that floated in case it rained...in the desert where Noah and his family and community lived and worked and worshiped. 

Basically, Noah was told to create duplicates of his critical data, ie, everything God had created for Noah to live his life, run his business, according to His plans.

Create duplicates, Noah. Back up your system...in the event of, oh say,  rain for 40 days and 40 nights.Who knows, you know? Sure, your living in My desert and all, but strange things happen...and a really strange thing would be a down-pour that lasted...what...oh, say 40 of My days and 40 of My nights. Back-to-back-to-back.  I'm just saying.

Actually, God, as Chief System Designer /Admin/Coder was telling Noah to back up His system and create duplicates of His data, not necessarily Noah's system resources and data.  And only, Noah, it seems given...no one else survived what came next according to the Big-B Blog post in the category Genesis. I don't know. I wasn't there.

( I digressed. I'm recovering from too much creativity and wonderful folks at the BlogWorld Expo in Las Vegas.)

And now we have lots of ways to communicate these types of useful messages that serve to foreshadow impending disasters. (So many ways in fact it can seem confusing...)

And, I'm using one of those means of communication, this blog, to remind small businesses that...ahem...given all the floods and natural disasters we're seeing it's not a bad idea to create duplicates of your critical data/system resources and  have a disaster recovery plan...in case it should rain for 40 days and 40 nights...in say, Las Vegas.

MySolutionSpot and US News and World Report have some tips and reminders for doing just that.

The Growth Paradox

The Growth Paradox

It may seem ironic, but the organization that's good at solving today's challenges will create a new and bigger set of challenges for tomorrow. Why? Because success leads to the need for more: more capital, more leadership, more systems...

Gary Harpst, Execution Revolution, Pgs. 39-40

The BEST Online Marketing Conference...

That's how Anita Campbell from Small Biz Trends described this 2-day event: The BEST Online Marketing Conference.

And...well, Anita knows small business and she knows online marketing. She's a huge success in both.

Formally, the event is titled The Small Business Marketing Unleashed Conference. And it's happening next week, September 22-23.

And with this link to Anita Campbell's Small Biz Trends site you'll find her discount code for this event. See. Not only is she smart and successful...she's generous, too.

Disclaimer: I'm one of many small business experts who post regularly on Small Biz Trends. That being said, I've said the same things about Anita behind her back even before she invited to contribute regular guest posts there.

The myth of B2B

I've always been perplexed when the conversation turns to the distinction of B2B, B2C, and the fine distinctions, and expertise and careers built around maintaining the distinction.

The perplexity arises from me being a visually-oriented. Most guys are...So, as the conversation drones on, what grows in my mind's eye is the image in my mind's eye, of an inorganic, automaton business making a buying decision based on the marketing another such inorganic, automaton, also a business delivers. I can imagine them both, B's, speaking in machine-code, Cobol or C or Ruby-on-Rails...and exchanging electronic business cards only they can read, discussing the needs of their inept organic masters, negotiating...?...

I'm usually left behind at that point.

Then I realize that maybe...the real automatons are those driving this discussion. It's simpler and easier, really, to package it all up in a nice little box with buzzwords in lieu of real conversation. Conversation between people, like democracy, gets messy. I can hear them thinking:

It's so...uncertain. How do you control the marketing message with all that uncertainty. So...let's manage the discussion with false flags of B2B vs B2C...Now we're masters. We're myth-makers.

John Moore at Brand Autopsy shared this truism:

#47. Make sure everyone in your company understands that people are loyal to products and brands – NOT other people and relationships.

It inspired me.

That truism is one of 101 ways a business can destroy itself from Ed Welch. John shares Ed's list in PDF.

Small business has such a huge asset here. It's often unrealized, overlooked, as they look at their smaller budgets for marketing and branding.  They have personal relationships with everyone building their brand: customers, employees, partners, vendors, the community where they build their business.  They don't have the funds often to pay someone to confuse them with talk of B2C or B2B. They speak in their voice, a real voice, a real person's voice. No B2B or B2C campaign can speak with that passion, that power, that authenticity of one person talking to another about their needs and how they can solve them.

Small business: don't forget that. You have one huge competitive advantage. That's you, your voice, your passion, your personal connection with other people who share your brand.

Then

Judging Employee Loyalty with Net Promoter Scores

I'm a huge fan of Fred Reichheld and his Net Promoter Score methodology for measuring customer loyalty and determining what's needed to build it.  The Net Promoter Score results from the very simple Ultimate Question Survey.

1) Would you recommend us to a friend?

2) On a scale of 0-10, with 10 being definitely and 0- being definitely would not, how would you rate your likelihood to recommend us to a friend or colleague?

3) What do you tell people about us?

You can see it gets right to the heart of customer loyalty. And it does so in a simple, effective, respectful, survey. I say respectful for the customer's side.  Those 85 question surveys...um...they communicate to your customers that their time isn't very valuable and that's why they have the time to answer your 85 questions. A 3-question survey communicates respect and encourages more open responses by allowing the customer to use their own words.

I've always thought NPS could be used to judge employee motivation, loyalty, engagement. They are the ultimate customers of a brand, a company. And, if your employees don't recommend working for their company to their friends and colleagues....what do your employees communicate to your customers?

Still, there's enough nuances in the relationship between employees and customers and the company that makes the translation for employees not so simple. And Dr. Laura Brooks from SatMetrix opened my eyes, in her post Is NPS Appropriate for Customer Loyalty to some of these conflicts

A. Conflict of Interest. An employee may see their job at risk from their responses.
B. Skewed or Contradictory Scores. Employees may also be more critical of their company. That doesn't mean they're less passionate or engaged with the brand.  In fact, it may indicate a very passionate, but frustrated, connection with their brand, their employer.

Still, employee loyalty is the engine driving customer loyalty. You either have both or neither, ultimately. And Dr. Brooks sums this up nicely at the end of her post:

These experiences are interconnected—and only by moving toward more customer-focused employee feedback will employee loyalty move out of the human resource function and into the core of the customer experience strategy.

If you're interested in Net Promoter Score and its use in your business (and you should be) then you should make their blog, fittingly named Net Promoter Score, a regular read.

Money can't buy you employee engagement, either

Money can't buy you love. And it can't buy you employee engagement, either. For both, money can buy distractions from the truth.

Among the top 10 motivators for us all at work, money's always near the bottom. Recognition by our peers and leaders, appreciation for our contribution, respect, the resources (technology, support, clarity of purpose, the right position, etc) to do our best, the opportunity to grow professionally and personally, balance between work and life, all rank higher than money.

And small business, that's you, are best positioned for 2 reasons to leverage these things.

1) Cash is usually in short supply with a small, growing, business. That makes it easy to look elsewhere for resources to engage and inspire everyone in your company.

2) Your work environment remains informal. There's no employee manual that interferes with personal, real, authentic, meaningful, relationships with your employees.

There's more on this at How to Boost Employee Morale on A Budget and a list of 10 Ways to do that.

Corporate Strategy: If Nobody Understands It...

then how do they execute it?

3% of corporate executives think their company is successful at executing its strategy.

5% of employees understand their corporate strategy.

Source: Page 30, Execution Revolution, by Gary Harpst. Footnotes in the book reference their original source.

What Makes a Peer Advisory Board Work?

We often get asked the question what makes a peer advisory board work? I think the real question is what makes one work well. How can a peer advisory board deliver value to your business?

But what does that mean? What does that look like?

Is it when a group of your peers help you resolve a problem you have been wrestling with? A problem that when solved increased your revenue, profit, equity and value of your business.

Is it when your peers provide you with a solution you’ve never thought of? When your peers provide you with perspective or a different way of thinking that stops you from taking an action detrimental to your business? When you help some of your peers get “unstuck”? Or when one of your peers pushes you to take a productive but much needed action outside your comfort zone?

It of course is all of these things. But how does it happen? Is it a rare event? Is it an event that can’t be captured or repeated? Or is it something a bit more predictable? Are there factors that if applied create this value from a group of peers?

As you probably guessed at PeerSight we think it is a much more predictable event. Not that we get it right all of the time, but the factors that deliver a “good” peer advisory board to occur are known, and if applied usually produce a valuable experience for the members, and accelerate the growth of their businesses.

Ok? So what goes into an effective peer advisory board? What are those factors?

Shared goals: As you might imagine an effective group starts with members that have shared goals. Goals that when met fulfill needs of more than just one member of the group. Easy enough eh? This is difficult in any setting much less in a peer advisory board made up of leaders of different businesses. Shared goals in a peer advisory board come from selecting the “right” members for each group.

For a peer advisory board this occurs in the member selection process. As a foundation all members need to have the belief that they can learn from the experiences of others.

In addition they need to be matched in terms of a combination of their business experience, the stage of their business and their business ambitions. The good news is that the 50+ year success of peer advisory boards is founded on the belief that entrepreneurs and small businesses have much more in common than the differences that exist in their industry and specific businesses.

An understanding that no one will ever know more about your business than you do: As a group matures the members develop a better understanding of each other’s businesses, each other as people and leaders. If we have done our job in the first step (matching the right people) the result is greater trust, better advice, better decision making and increased accountability.

Come Prepared: In order for a peer advisory board to deliver maximum value, the members must come prepared. Success in this element of a Peer Advisory Board involves three things:

· Determining your absolute most important issues and priorities. Those areas where the input of the board is most important and will drive the growth of your business.

· Preparing alternatives on each issue. The other members are experienced and share most if not all of the same entrepreneurial challenges you do….but they don’t know as much about your business as you do.  As a result they are of greatest value when they can help you sort among very real and clearly identified options.

· Tools and structure. Tools to help you make sure you are focusing on the most important priorities, and structure in the form of questions from an expert facilitator to ensure that each member is considering options in the right areas of focus.

Diagnose before you prescribe: Entrepreneurs by our nature have strong opinions…so strong that in many cases we provide answers to questions before we have taken the time to understand the real issues and root causes. Hey I resemble that remark.

It is something I struggle with often. In a Peer Advisory Board this can result in a less than valuable answer for each member. So what do we do? Over time the group develops a cadence that addresses this problem. It becomes part of their individual and group behavior. But in the beginning this too is the value delivered by the role of the trained facilitator. Value delivered by ensuring that each member takes the time to step back, ask questions and seek first to understand.

So there you have it. Easy, eh? When you put it all on paper it sounds a bit more scientific than it really is. It is still a art and that is why at PeerSight we continue to research best practices in group dynamics and hire experienced and successful small business facilitators.

Steve MacGill

*********************************************

Steve is the co-founder of PeerSight. PeerSight is the pioneer in virtual Peer Advisory Boards. We provide the platform business advisors use to deliver virtual peer advisory boards to their clients.

Hiring "A" Players Remains Number One Issue

Judging from my stats here, the number one challenge facing business remains Hiring A Players. The most frequently read post I've published is:

Small Business Resource of the Week: CIDS Interview.

What is a CIDS Interview? CIDS stands for Chronological In-Depth Structured. A CIDS Interview is a Chronological In-Depth Structured Interview.

Brad Smart, PhD, originated the CIDS Interview and first described it in his book: Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People.

People are searching for this resource on Google, DogPile, AOL...everywhere.

They're searching for a solution to their most pressing need: Hiring A Talent. And they're searching specifically for this resource. They're searching for terms related to CIDS, Chronological  In-Depth Survey. 

That's a good thing. CIDS is a systematic, borderline scientific, means to understand a candidate's behavior patterns and tendencies...as well as their job-specific skills. I say borderline scientific because its a process that can be repeated, duplicated, consistently and independent of culture, industry, company-sized, hiring manager, participants. It requires no faith, though an interviewer may have faith, out of desperation, before the  first time they use it...God, I hope this process works. Regardless, the process works the same and if followed will yield the same results: a very high percentage of A players will be found and all others avoided.

Sidenote: it's interesting with unemployment rising that this resource on hiring...is such a popular post.  My thoughts are that it's a sign that companies recognize that talent is the differentiator in more and more markets, a growing gap exists between A players and all others, and other approaches are not as dependable and systematic. What do you think?

Streamline Your Business with These 5 Services

Deborah Brown is Assistant Editor at SmallBizTrends. She posted, awhile back, on 5 Services to Streamline Your Business Operations.

I usually find resources in posts like this are interesting, but not ready-for-prime time, maybe.

Not so, in this post. The resources she includes cover email, billing, CRM, time/project management (I could use that one!), shipment tracking, fax and phone management.

Check them out.

Thanks!

Disclaimer: I'm one of a number of small biz expert guest authors at SmallBizTrends.

Reputation Management: It's for small companies, too

Matt McGee, at Small Business Search Marketing, reminds us that reputation management matters for small business, too. 

Besides the reminders, he includes links for resources to help you do that. And if you're not well-versed in this whole area, and current knowledge seems fleeting these days, then check out the books he lists in his post, also.

Burnout: It's an issue

Burnout in small business leaders is a huge challenge now. It's not getting any easier as the pace of technological change increases and as competition in any market with any product seems only to grow daily.

Figure out now how you're going to manage the stress of change, growth, a small business, wearing many hats.

I wrote last about how I stay focused. Stress brings focus and clarity at first. Over time though, stress breaks down our ability to focus productively. Agitation, aggravation and anger aren't signs of focus. They're signs of your inability to focus. I speak from direct experience as both a source and audience for their expressions.

Peer Advisory Boards are another resource to help you manage the stress. It's a board of your peers. You all face the same challenges. You all need help. And you're all in position to offer it. And it's in a trusted, safe environment. I'm a member of Peersight Online. I've included it as one of my small business resources. It's proven invaluable. Steve MacGill's the CEO and he guest posts here on Tuesday's. His most recent post is already published today: Is Advice Outside Your Industry Helpful?

Burnout. Find the ways and means and resources to manage it now. You'll need all of them and more in the coming years.

Links:

Seattle Times, Small Business Owners Hit with Burnout Blues.

BizSugar who included the above article as one of their Top 10 shared posts.

PeerSight Online: Small Business Resource of the Week.

My Tips for Staying Focused

Peersight Online

How business can weather this storm.

(Ok. Business media is calling it a storm. It's not a recession. And they never uttered that R word. 'k?)

Forbes   some gas-station/convenience store owners and  what they're doing to weather this storm. their efforts to stay afloat in this storm. (Note: One group not profiting from the rise in gas prices ar gas stations. So, stop complaining to their cashier about the gas prices.)

It comes down to a couple of categories.

Add margins. Find products or models with added profit margins. Makes sense. Sometimes in a storm...we forget to do what makes sense. For retail, convenience/gas stores, adding margins means encouraging customers to pay with cash. Credit card processing eats 2-2.5% of your gross margins as  with their processing fee.

Tim Berry and Seth Godin point out an easy way to add profit-margins and cash-flows is to sell more to existing customers.

Cut Costs. One store owner stopped offering paper towels for drivers to clean their windshield, cut out the free coffee for their employees, stripped the carpets off his floor so he can cut their cleaning costs, and now he's his own landscaper mowing the lawns himself.

I'd add one idea:

Ask the employees. They know what works, what doesn't, what customers talk about and don't. They know the reality of the economy whatever it's name, storm or R---. And they know the customers because they're one, also. They also know their jobs will be at risk in storm.  Be honest, but don't frighten. Let them know the current state, what's happening, it's impact on the company and then on their jobs. Ask them for ideas on Adding Margins and Cutting Costs.

Go one step further.

Set a goal. Include an incentive if that goal is reached. That keeps the motivation positive and the attitudes upbeat. Communicate the progress toward the goal. Celebrate each great idea and its source. That builds a positive momentum and encourages more ideas.

The employees choose the incentive. But, you choose the amount. Make sure they tell you the incentive they want. Nothing kills a great incentive plan like an incentive no one wants.

How You [Small Business] Are Coping with Bad Times

Ok, maybe they're not bad. They're definitely not bad if your market is global and your products are exported. The weak dollar helps make your products much more attractive.

And we're not* in a recession....as we learned Friday.

But, times are tough for small business. And the National Federation of Independent Business, NFIB, has the data from its latest Small Business Trends Report showing what you're doing to cope. Some are good:

Over the past six months, small business owners are highly likely to have become more attentive to their cash flow and inventory status.

Some aren't, possibly:

Increased marketing and sales activity is a common strategy to combat an economic downturn. However, this is one of the least frequent approaches a small business owner uses.

* Maybe, we're not. Though, if our economy continues to eliminate jobs as its competitive strategy, we'll be in one soon enough: Who'll be left to drive our economy? Jobless folks don't by consumer goods. And if we don't buy consumer goods from overseas producers, then their economy will go in to a recession.

Spare bedroom getting cramped?

Wanna move your small business out of the garage?

Here's two online resources to consider:

* Rofo (Bay Area only right now)

* Loopnet (Requires a fee to search listings)

Of the two, Rofo is focused nearly exclusively on finding up to 5000 sq feet of office space. And it's site offers user-reviews of office space and helpful advice on all things commercial real-estate related with an orientation to first-time renters.  But again, at this point, Rofo's only serving listings in the Bay Area. But that should change quickly.

In the meantime, check Loopnet. While they found no listings for 2500 Sq. Ft of office space in Fairfield, Iowa....they did show 158 possible listings in the Des Moines area.

Link from TechCrunch.

3 Great Reasons to Eliminate Taxes on Small Business

Here's 3 good reasons to eliminate taxes on small business.

1) Jobs. Small business creates jobs. Look at any recent job report. You'll see it's the small business that's creating/adding jobs. That benefits their customers, their community and their, aka our, economy. And the most recent statistics show our economy is doing a miserable job at creating jobs overall.

So, why not reward the one segment of our economy who is successful at creating the driver of our economy and our ability to compete in the global marketplace?

2) Employee Health Care Benefits. Small businesses can't afford to offer them. It's a huge disadvantage when competing with large corporate brands for the human talent needed to grow their business. It's also a huge drag on our economy to trap talented employees in large companies where their talents' contribution is often diluted.

3) Small Businesses Eat Cash. Small businesses eat cash like a baby drinks milk: Many times during a day; sometimes 2-3-4 times at night, too; always wanting more. Relentless, insatiable. And like babies, too, it's options to meet this need are limited.

Add to this is the fact that small business too often competes against large corporate brands known as cash-cows. Why this term: cash-cow? Because  large companies generate cash like cows generate milk. In fact, as a company matures it streamlines its operations to focus solely on generating cash like a cow's functions are focused on generating milk. No innovation, R&D is cutback, upstart competition is stifled with the use of its cash-reserves in legal assaults, lobbying efforts and overwhelming message saturation.  One-pointed dedication. The cow's is generating milk. The large, mature, company's is generating cash. And then that's in addition to having access to greater numbers of resources for its cash needs and those with greater amounts of cash to offer.

It's really about leveling the playing field in business competition between small business and large corporate brands. The issues or challenges addressed with this step are the issues and challenges unique to small business.

And the benefit of that would be greater innovation, greater numbers of small businesses being created, a higher percentage surviving into maturity, a stronger and more diverse economy from the new products and services and ...JOBS...created, a stronger global competitive stance, and a better tax-base for both our federal and state budgets. (Don't they need it?)

Two articles at Anita Campbell's excellent SmallBiz Trends community inspired this post:

* Zero Capital-Gains on Startups - a Not So Great Idea by Scott Shane, Professor of Entrepreneurial Studies at Case Western Reserve University and fellow guest author**.

* Stop with the Taxes and Regulations on Small Business, by Anita Campbell.

** I'm also a guest author at SmallBiz Trends.

Tips for Tough Times: Control Your Cash

This shouldn't be a tip for tough times. It should be a tip for all times. Control your cash.

Why? Do it well and you can avoid the negative impact of most tough times;tough times like we're having now: We're not in a recession, we're just eliminating jobs. Cash is king. Control it and you're the king.

How do you do that? How do you control cash?

1) Make sure every expense generates a positive financial ROI. Some might write this as 'justify every expense'. I don't. There are many metrics we, as people, use to 'justify' behavior. Most have little to do with financial ROIs.

1a) Ask. Ask everyone in your company, at least your managers, what ROI is generated by any expense with their department.

1b) Ask transparently. Use a wiki or some collaborative tool to share this discussion in an open, transparent, manner.

2) Approve every expense. It's surprising how many CEOs of small business do not approve of each and every expense before it's charged. How do you get control of your expenses if anyone but you is approving them?

Sure, you ask for input. You want participation and engagement from your company's leaders in this critical discussion. You want the conversation open, transparent. But at the end of the day, when all's been said and written, you're directly responsible for the cash-balances each month. And you have to make the tough choices with how to use your limited budget. That's why you get paid the big bucks.

3) Sign every check. See above. I was lucky. I had a treasurer who insisted I sign every check. I trusted her (still do). I knew that trust would never be betrayed. And I offered it as an exception, in the event of a one-time event. But to her credit, she absolutely and always reminded me that it's not a good habit to begin.

4) Understand your cash-flows. Read and understand your cash-flow report and what it communicates about your business operations and success.  Make it a regular part of your monthly routine. Some may have reports called Sources and uses of cash, operating cash-flows, ebitda reports...whatever. Whatever you call them, whatever report shows what you spent and what revenues you received from what sources...master them every month.

Net income and profits, and the reports used to generate their numbers, are great. But both terms, profits and net income, are used for tax purposes. That's why phantom expense categories, such as depreciation and amortization, are not included in your cash-flow reports. Depreciation and amortization figures are categorized as phantom because there's rarely cash outlays associated with their amounts.

4a). Find an expert. See point number 1a. If you don't understand them, ask. Ask your bookkeeper, your treasurer. If they can't answer your questions, then ask your accountant. Find a trusted and knowledgable source to make you understand those reports.

Part-time CFOs are a great option for the smaller company who needs the advice of a sophisticated, educated, experienced financial expert, but at the same time can't justify their expense on a permanent basis.

5) Manage your cash balances. Review them at least monthly. Make sure they're being used effectively by balancing your need for access vs their ability to generate interest income. Your expert can help you with this, too.

Control your cash. Cash is King. When you have the cash, you control your company, your brand, your marketing. You are king.

Tips for Tough Times are written for the small business leader, CEO, COO, President.

Small Business Owners DON'T See a Credit Crunch

From MyBusinessMag comes this Small Business Owners Are not Indicating a Credit Crunch, Despite New York Times Trend Story.

[NFIB's] current monthly survey reveals the following:

"The net percent of owners reporting loans harder to get in recent months fell one point to a net 7 percent (8 percent said "harder," 1 percent said "easier"). The average reading since September's surprise Fed rate hike is 7 percent. Only 2 percent of the owners cited the cost and availability of credit as their No. 1 business problem (down 1 point), far from the record 37 percent reached in 1982.

That's very good news, a great way to end the day.

Even Pirates Have Startup Metrics...

From Chris Schultz at Voodoo Ventures:

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