5 Brazen Insights on How to Build a Better Small Business

Photo: Indochino.com

 

When it comes to starting a business, sometimes having a great idea is the easy part. Building a successful business around that idea takes vision, knowledge and sometimes a bit of luck in the form of favorable market conditions.

 

There’s another thing that is often the difference between a successful and unsuccessful business venture: savvy business advice. Whether you hear it from specialists in the field or personal connections with industry knowledge, it’s important to weigh the wise counsel of experienced business minds.

In that spirit, let’s look at five key insights from leading professionals on how to build a better business.

1. Keep your financial house in order.

   When you start a business, it’s not uncommon to wear many hats — often by necessity. One area where it’s easy to make a critical mistake is finance. There’s more to it than making payroll and meeting tax obligations. Not that paying taxes isn’t important. Steve Klitzner of Florida Tax Solvers says, “One of the most important things for small business owners to do is to pay their quarterly taxes on time.”
   
   Klitzner says not doing so “can lead to penalties and cause the business owner to pay more than they already owed on their taxes.” Business owners should also consider that they may miss out on favorable tax deductions simply from lack of experience. While handling your own taxes saves money in the short-term, it may end up being far more costly in the end, if not handled correctly.

2. Protect your brand.

   In business, the health of your brand is almost everything. Be more than a brand caretaker — be an ultra-vigilant brand watchman. This goes for everything from online reputation management to potential trademark infringement. Concerns about infringement cut both ways.
   
   If you accidentally find your company infringing, it could lead to potentially ruinous legal bills. Trademark attorney Josh Gerben recommends business owners perform a top-to-bottom trademark search prior to starting a business. An experienced trademark attorney will ensure your proposed trademark is free for use– and give you peace of mind.
   
   Gerben suggests, “Instead of spending a lot of money to build equity into a brand that may be infringing on someone else’s trademark rights, it is highly recommended that you hire a trademark attorney to do a professional trademark search.”"A trademark search performed by an attorney will help to ensure your trademark is truly clear to be used in the marketplace.” By following Gerben’s advice you can avoid a potential legal minefield — which is the last thing any new business needs.

3. Protect your company with small business insurance.

   Insurance is one of the costliest aspects of running a business; involving paperwork and administration. So many business owners pass on business insurance and hope for the best. Ryan Hanley says entrepreneurs should avoid that approach at all costs. Hanley, author of the Albany Insurance Professional blog, suggests that “skimping on insurance — especially health insurance — is like playing Russian Roulette with your future.”
   
   While bypassing insurance will save money upfront, the incurred costs of unexpected medical care is often catastrophic to a business. If you or your employees aren’t healthy, chances are the business isn’t healthy either. Hanley encourages business owners not to consider insurance a luxury. He says it is best viewed, not in terms of current price, but in terms of future cost.

4. Market your business effectively.

   Even the best managaed small business doesn’t get very far without effective marketing. On the other hand, great marketing can sometimes compensate for other areas where a business is lacking. For businesses without a large marketing budget, it’s sometimes difficult to know where to deploy your resources.
   
   One way to market economically is through an online presence. A well-designed company website is critical for all businesses. Internet marketing strategist Jeff Shjarback says that your company website “is an excellent way to increase sales and generate new leads. A website not only draws people in, but offers you a space to communicate with possible customers, current customers and post content pertaining to your business.”
   
   Once you’ve mastered the basics, optimize online marketing efforts through the savvy use of social media platforms. Building fans through services such as Facebook, Twitter and Instagram helps generate the best kind of awareness — word of mouth. Other techniques such as search engine optimization (SEO) and e-mail marketing can also build your brand and customer base.

5. Plan for future success.

   It’s never wise to enter into any situation without careful consideration of the facts and circumstances. It’s even less wise to enter into business that way. A well thought out business plan is vital for success. It helps you design your business approach and gives you a chance to consider variables that are certain to pop up later. It will also give you a good read on the true feasibility of your business model.
   
   Business plan specialist Dick McCormick believes that startups “don’t have to develop a written business plan to start a business. But a comprehensive, realistic plan will greatly increase your chances of being successful. Would you build a house without a blueprint? Would you drive cross-country without a map?” Starting a business without a well-reasoned plan is a good way to seriously diminish your odds of success. A thorough plan will guide you and make sure your business has the solid foundation it needs to flourish.

Zack Kirchin is the senior author at TheTechFortress, a blog that references the latest technology, gadgets, news and more.

Ten questions to ask before expanding overseas

By: Aliza Dizik

Deciding when to go global is a tough call for entrepreneurs. They may be tempted by opportunities in hot markets like China, India or Brazil, but could risk venturing abroad before they’re fully prepared.

“Many companies expand too quickly,” says Jon Fjeld, executive director of the Center for Entrepreneurship and Innovation at Duke University. While selling overseas extends your company’s reach, he says, you don’t want to move into international markets too soon and use resources you need to continue growing on your home turf.

Here are 10 key questions to ask before going international: 

Have I built a solid foundation at home? Make sure your business is stable on a day-to-day basis before pursuing overseas markets, Fjeld says. For instance, you should determine whether your business could function well in your absence. Companies also “need to have the distribution running smoothly enough so that they don’t have to focus on it constantly,” Fjeld says. 

 

Do I have the bench strength for international expansion? You will need to assign one or two senior employees to your international effort. So, you need to determine whether you can afford to move people from their current responsibilities, as well as whether they bring–or can quickly develop–the necessary skills for overseas sales and marketing. “At minimum, you’ll need someone who is going to be accountable for the export sales part of the business,” says Tom Moore, deputy assistant secretary for international operations at the U.S. Commercial Service, the country’s trade promotion arm, in Washington D.C. 

Will I find the talent I need in another country? If you decide to expand, finding local talent can be a challenge. Some countries simply do not have enough of the skilled labor companies may need. You also will be competing with established companies that know where to find talent and how to recruit local candidates. One potential source: local educational institutions such as engineering programs and business schools. 

 How will I need to adapt to the local culture? Some countries such as France and Japan expect companies to adapt to the local culture, says Carl Theobald, chief executive of Avangate in Redwood City, Calif., which provides e-commerce capabilities to small and medium-size companies. That may mean customizing your product or service to meet local customers’ tastes. At the very least, you will need to put your marketing message in the local language and make sure the meaning translates correctly.

 

Do I understand the cultural implications of the sales process? Closing a deal abroad can be a vastly different experience than you’re probably used to, says James Hunt, adjunct professor of entrepreneurship at Georgetown University’s McDonough School of Business. “Some cultures struggle to say, ’No, we aren’t interested’ in a product or service, which means you can have an extremely long and costly sales process that never leads to a sale.” Such behavior is especially prevalent in China and the Middle East, he says. To avoid this problem, look for customers who have bought similar items or services in the past, Hunt says. And sometimes it’s better to cut off talks if they lag for too long.

Have I sized up the local competition? Understanding your competitors abroad can provide insights into how – and whether – to expand. But many companies don’t take time to figure out whether similar products and services are already available in a new market and what they would need to offer to compete successfully. Spending time abroad and speaking with potential customers can help to avoid costly mistakes.

 

Do I need an international partner? For many companies, it’s critical to find a local partner when expanding overseas, Mr. Moore says. Partners can help facilitate sales, while keeping costs down for the home office. Forming a partnership takes time – often, a year or longer – and requires plenty of due diligence to find the right fit, Mr. Moore says.

Am I financially able to sustain an overseas expansion? Expanding internationally requires a startup-like period that’s longer than many entrepreneurs anticipate. “You have to expect to lose money for a while,” Fjeld says. So, you not only need enough capital to make the initial investment, but you also should have a long-term financial plan in place, he says. You will likely need to update the plan to reflect actual revenue and expenses as you ramp up in the new market. “It’s not something you are going to turn a profit on right away; you have to be there for the long haul,” Mr. Moore says.

Where’s the potential for red tape? Expanding beyond the domestic market can mean lots of extra paperwork, especially for medical and technology companies. With such a variety of regulations surrounding exports, it’s important to understand what’s required for your particular industry before attempting to expand abroad.

 

Should I simply expand my online presence? For some companies with a strong website, it may not be necessary to establish a physical presence abroad. You may be able to offer overseas shipping and expand payment options without the hassle of extensive tax regulations. “Selling online through an e-commerce partner with international capabilities is far easier and much less costly than building a local presence,” Mr. Theobald says. But at least in some markets, you would need to develop websites in another language that accept the local currency. Online shoppers “are more likely to buy when the experience is in their local language [and] local currency,” Mr. Theobald says.

The Do's and Don'ts of Cash Management

By: Bronwen Roberts

Working capital is a highly effective barometer of a company's operational and financial efficiency and effectiveness. The better its condition, the better placed the company is to focus on developing its core business.

The early, primitive attempts at maximizing cash management can be traced back to the late 1970s. Unbelievably, there are still some companies who haven't yet understood that putting cash trapped in the balance sheet to better use can give them a competitive edge over their rivals.

A most recent report shows a further reduction of working capital in companies in the US and Europe compared with the previous year, of between 3 per cent and 5 per cent. This demonstrates the continuing increase in the importance of working capital management to help companies achieve their strategic objectives.


How to do It
There is more to working capital management than simply telling a company to collect its debtors as quickly as possible, to delay paying its suppliers as long as possible, and to keep stock levels as low as possible. A properly conceived and executed improvement program will certainly focus on optimizing each of these components, but will deliver additional benefits that extend far beyond the merely operational. It will demonstrate the need for ambitious corporates to integrate working capital management into their strategic and tactical thinking, rather than view it as an optional bolt-on extra.

There are a number of dos and don'ts to help guide corporate thinking. Firstly, do think of working capital management as a strategic objective that can enable your corporation's goals. We cannot over-emphasize this opening point. The same factors that drive a company's working capital also drive its operating costs and customer service performance. Therefore, by addressing the drivers of working capital a company will also experience significant improvement in operating costs and customer service.
 
For example, a company's working capital is deteriorating due to an increase in past due accounts receivable (AR). A review of the overdue AR illustrates a high level of customer disputes. The disputes are taking on average 30 days to resolve and consuming significant amounts of sales, order entry, and cash collectors' time. By tackling the root cause of the disputes, in this case poor adherence to pricing policies, the company can eliminate the disputes, thereby improving customer service.

This will free up the time of staff in sales, order entry and cash collections, enabling them to be more effective at their designated roles. This in turn increases productivity, reduces operating costs, and potentially increases sales. Working capital will improve, as customers will have fewer reasons to hold payment. This example illustrates how working capital is one of the best indicators of underlying inefficiency within an organization.

Consider Another Perspective
Don't think of things only from your own company's perspective. If you can help your own customers plan their inventory requirements more efficiently, for instance, you can match your production to their consumption, efficiently and cost-effectively, and do the same with your own suppliers. The potential implications for inventory levels are huge. By aligning ordering production and distribution processes, you increase inherent efficiency and achieve direct cost savings almost instantly, as a by-product. And then you discuss the best way to bill or to pay.

Do educate your organization to consider the trade-offs between different working capital assets when negotiating with customers and suppliers. Depending on the usage pattern of a raw material, there may be more to gain from negotiating consignment stock with a supplier versus pushing for extended terms. This could apply particularly in cases of long lead-time items, or those that require high minimum order quantities.

Agree Formal Terms
Do agree formal terms with suppliers and customers and document those terms carefully. Keep them up to date, and communicate those payment terms to employees throughout your business, particularly those involved in the customer to cash and purchase to pay processes, including your sales organization.

Don't allow prolific new product introduction without a clear product range management strategy. Poor product range management creates inefficiency in the supply chain, as companies are required to support old products with inventory and manufacturing capability. This increases operating costs and exposes the company to an obsolete inventory that may have to be disposed of.

Collect your Cash
Don't forget to collect your cash. Many businesses fail to implement effective ongoing collection procedures to prevent excess overdue funds or build-up of old debtors. Ask customers if invoices have been received and are clear to pay. If not, identify the problems that are preventing timely payment.

Confirm and reconfirm the credit terms agreed upon with the customer. Often, credit terms get lost in the translation of general payment terms and what's on the payables ledger in front of the payables clerk. Do devote the requisite amount of time and attention to the critical issue of dispute management.

Don't set top-down targets uniformly across the business. For instance, too many companies impose a 10 per cent reduction in working capital for each division. This fails to take into account the potential opportunity within a division and can result in setting an impossible target that acts to de-motivate. Instead, balance top-down with bottom-up intelligence when setting targets.

Targets Drive Behaviour
Do set targets that drive the desired behaviour. Many companies will incentivise collections staff to minimize the aged AR over 60 days. Does this mean that customers who pay one to 60 days late are good payers? No, aged AR over 60 days will result in increased costs and time it takes to collect the debt. By incentivising staff to lower the amount over 60 days, you keep your costs down. Do educate staff, customers and suppliers that cash and cash management are important, and are an integral part of a successful business relationship.

Look Within Yourself
Don't assume that all the answers are to be found externally. Before approaching existing customers and suppliers to discuss cash management goals, fully understand your own process gaps so you can credibly discuss poor payment processes.

Do treat suppliers as you would like your customers to treat you. Far greater cash flow benefits can be realized by strategically leveraging the relationship you have with suppliers and customers. In addition, a supplier is more likely to support you in an emergency if you have treated them fairly.

Don't however, treat everyone the same. Use segmentation tactics to split your customer supplier into similar groups. This may be based on a basket of criteria including profitability, sales, AR size, past due debt, average order size and frequency. Define strategies for each segment based around the criteria and your strategic goals.

Do celebrate success in hitting targets. Emphasise the actions that helped you get there.

Conclusion
To summarise briefly, following the dos and don'ts will enable you to optimize cash and to highlight inefficiencies in your processes that must be remedied to better serve customers. It will enable you to build stronger partnerships with your suppliers across the total working capital value chain. This translates ultimately into improvement in bottom-line results, often a good deal quicker than you might expect, and helps clarify the senior management focus on strategic imperatives. 

Author Bio
REL Consultancy Group www.relconsult.com are global specialists in generating cash improvements, cost reductions and service enhancements by optimizing working capital. They are the only international corporate financial consulting firm that focuses exclusively on increasing operational efficiency from working capital and operations. They work with people to transform your organization, your customer's and your suppliers in more than 60 countries around the world.