General

Do you remember using the leverage principle as a child on a see-saw? The farther out you pushed yourself, the more important your weight became. If the kid on the other end was not out as far, and did not weigh more than you, ultimately you could strand the kid high in the air while you ended safely on the ground. The other kid was powerless to do anything except crawl down or jump down and leave you to play by yourself.

This is an example of the tipping point: where one side of a duo becomes so powerful that the other side no longer has a say in the result. Reaching a tipping point in the life of a company or of a country is no longer a fantasy because the distance between the “haves” versus “have-nots” is growing.

Large businesses move closer to the tipping point every time the executive compensation committee increases the pay of the top dogs without consideration of the income needs for the lower level employees. Or cuts corners in pursuit of profit without consideration for the impact on the environment.

Countries are reaching tipping points in the competition between government employees and the taxpayers who fund them. Government workers in Greece have marched in the streets against the efforts of their broke government cutting costs.

In the USA government workers are paid significantly more than their civilian counterparts, a dramatic change from years ago that shows the power of civil service unions. The increasing grab by Washington for control of more segments of the economy adds more government workers who will demand high pay and top quality benefits, all on the backs of cash-strapped taxpayers.

Picture the fat-cat government workers moving farther out on the see-saw and you get the picture. Someday, if government continues to grow and if more and more citizens see their general welfare dependent upon government social programs, we will reach the tipping point.

Companies that reach the tipping point can pay a price in the stock market and their executives can find that they are left to play by themselves. I am not a union supporter, but I do believe in justice and fairness, and businesses that allow themselves to reach a tipping point should be dealt with severely by market forces. Their boards and officers need to get off the see-saw and go to a time out.

Governments that slide out on the see-saw and threaten to reach the tipping point are a risk to more than stockholders. Their bloated civil service ranks threaten the future of a country. In Washington much of the increasing size of the government is being built to produce the growing regulatory apparatus. Congress and the White House believe that their “experts” in charge know better than the folks in the real world. And who is to blame for that attitude? Businesses that have reached their tipping point have driven popular opinion towards the belief that more government is better for all of us.

But we know that is not true. There is a fallacy in over-regulation. Not only does it stifle entrepreneurialism, it adds a clear path for large, predatory businesses to co-opt the regulatory agencies for their own needs. This is exactly what happened in the Gulf Disaster, and is probably happening in other relationships within the Washington regulatory world. We may never discover these until another disaster occurs.

What can small business leaders do about this? First, let your elected representatives at all levels of government know your opinions. Tell them why over-regulation hurts your small business. Tell them the good your small business does in the community. Tell them your mission and vision. Tell them why they need to leave you alone because you understand your market better than they do.

Second, team up with other small businesses. Join an association that truly represents your needs. Be cautious of joining a large association that purports to speak for small business, but in fact has been co-opted by big, greedy businesses looking out only for themselves.

Third, examine your business plan and make sure you see a path to the future that can evade the worst of the regulatory fiats that are sure to come out of Washington in the next few years. It may not be possible to stay clear of everything, but pay attention to the limits such as employees and revenue that are used to define the targets of regulation.

Finally, pay attention to politics. Too few small business owners spend the time necessary to influence elections. That needs to stop because it is the only way you can move your weight a little further out on your end of the see-saw and prevent the big bully on the other end from stranding you in the air.

The tipping point in the USA is not here yet, and with any luck those of us on the upper end of the see-saw today will begin to realize we need to slide farther out now, before it is too late.

In the late 1980s my business career reached a fork in the road. Having left an executive position at a computer hardware manufacturer, the choice for the next source of income came down to two options: consider a CEO role at a company in a city about an hour away or go into business for myself. You may be facing a similar pair of options at some point. Now, 23 years later I’m glad I took the road towards independence. Making the decision was a bumpy road however.

Choosing to be my own boss was relatively easy because as an employee at whatever level, chafing at the bit and second guessing bosses made my business life difficult at times. In considering the CEO opportunity, not only did the daily commute (moving was not an option for family reasons) pose an obstacle, but since the company was venture capital financed, the real bosses were those who put the money into it. Satisfying them was a big part of the job, and that might have been a challenge, and it was definitely an unknown.

During the six months I was searching for the right next step, the career guidance firm I worked with included assessment tools that evaluated your ability to be an entrepreneur. Not surprisingly, I scored high in that category. But what sort of business was right for me? They had an assessment for that, too. It pointed me towards a B2B business, and identified potential franchisors to consider.

But wait! Wouldn’t a franchisor be a boss, too? Wouldn’t it be too constraining to live within a system that shoehorned me into a particular mode of marketing, sales, production, etc? After rationalizing those concerns away, I started down the road to accepting a franchise that was in an industry with which I was familiar, included extensive use of computers in the business, and serviced the needs of businesses.

It sounded good, I sent the initial deposit, and then began to review the franchise agreement with the aid of a counselor at the career guidance center who had been an attorney for a franchisor. We found a number of issues and my negotiations with the franchisor became sticky. The relationship ended suddenly when my check was returned with a Dear John letter after three months of trying to nail down the agreement.

In retrospect this was the best thing that could have happened to me. Concurrent with the negotiations, I networked within the local business community and my banker connected me with a business owner in a nearby town who owned the same kind of business, but was not a competitor. Through him I met an equipment distributor who convinced me that he could provide me with the complete set of equipment and ancillary items needed just as effectively and at less cost than the franchisor. He also made an important point to me: the primary benefit of the franchise system was its marketing guidance. Finding people who could operate the equipment, developing the financing, and most of the other details of starting a business would fall on me shortly after the franchisor blew into town, set me up, and then left. Since my career to date had been in marketing and sales, there seemed to be little benefit in becoming a franchisee and paying a percentage of revenue for ever, primarily to gain access to their marketing system and support.

DIY worked for me and the business went well. But after about ten years a competitor saw synergies between our two businesses that enabled him to gain a foothold in a different market and he bought me out. (Along the way I had acquired another business which was an interesting experience. And selling mine was an odyssey that proved stressful for both seller and buyer. But that is another story.)

For me, entrepreneurship is not the same as being a franchisee. There is immense satisfaction in starting from zero, making the necessary connections, and then executing a marketing and sales plan that works. But that came about because I had some previous knowledge about the business, absorbed detailed knowledge from every source I could find, and networked extensively. And continuing volunteer roles within the community developed the personal connections that led to more and more business.

What about you? If you find yourself frustrated and constrained in your current business role, what are your next step options? If you are not sure, use some assessments to learn more about your personal style, your value system, and your interest in independence. Decide whether running your own business within the system devised by an experienced franchisor is the right way, or whether you need the complete freedom to do it on your own. If you are an independent type, then go for the DIY, but be smart about it, Make a good business plan. Line up your advisory team, make sure you have plenty of resources (cash to invest and other cash to live on for a number of months) and then take the plunge.

On the other hand, if that path seems fraught with excessive risk for you, look into buying a franchise. And if you take this route, make up your mind to get everything you possibly can out of the franchisor. Exploit the business system provided to you, absorb the training, and milk the support staff dry. Become a squeaking wheel in the early months of your new business and then as your fledgling business matures, understand that you will develop a love/hate relationship with the franchisor. You will become exasperated with them, and they with you. But it is a relationship you need to nurture because your future is tied to theirs and vice versa.

As a teenager, I became keenly aware of the vagaries of being in business for yourself, since I watched my father struggle from time to time to make ends meet and grow his professional business. I vowed then that I would never get into a situation where my income was so uncertain. What I overlooked was the fact that as an entrepreneur, he was free to call the shots on his time, something most employees cannot do. He also enjoyed many activities and volunteering that an employee would find hard to fit into daily life. These are the benefits of owning your own business.

People define success differently. And it isn’t always about making the most money. At least I came to the realization that owning my own business would work better for me. It did. And I wish I had come to that conclusion ten or fifteen years sooner. If the urge strikes you, give it serious consideration. Life as a business owner is sweet…except when it’s sour (which isn’t often!)

As you stare down the tunnel towards the end of the economic downturn, the light appears closer and brighter. So now might be the right time to assess what you can do to speed up your trip towards the light of a growing economy. Consider forming one or more strategic alliances to get a jump on growth. In the same way that you will be careful in adding full time employees today, you also will be careful in making growth investments for your business. A strategic alliance is a way to grow without making a huge initial investment.

Booze-Allen & Hamilton reports that strategic alliances are becoming popular in nearly every industry and are important drivers of added growth. That’s just the kind of boost your business may need today. With the right alliances you can drive into new markets faster, meet competition more effectively, reduce costs, and respond to a fast changing marketplace. A primary benefit of strategic alliances is to minimize risk, generally by avoiding re-inventing the wheel.

A “partnership” with other businesses is an effective way to gain improved exposure and increase your revenue. Sometimes these close working relationships just seem to happen and other times they are the result of proactive searching and matching. Use an alliance to jointly market or sell into new channels, combine capabilities to produce a new or more complex product or service, add to your research and development, collaborate on design, etc. You can begin to work together horizontally with businesses that complement your own or you can link up with vendors or customers.

Let’s say that you make widgets and you have a customer who wants to buy your widgets but needs them redesigned for a unique application. But you do not have the in-house design capability. You could outsource this need, but you want a closer working relationship than you can get by simply buying the design hours from a “body shop.” What you are looking for is a business “partner” that can provide the design capability but would also provide the guidance you need to expand on this new custom business you are experiencing. Small businesses need to be market driven, and if your customers are telling you they want a broader or different service from you, responding may be the only way to keep growing. To launch off into this new custom production world and not fall on your face, you need a relationship that can endure and that injects experience you lack.

This is a typical scenario that leads to the need for a strategic alliance. Sometimes the company you choose to connect with is already involved with your business. Or perhaps you need to hunt down an appropriate partner.

But first do some work before you link arms with a new partner. It is important to document exactly what you are looking for from the alliance by documenting a basic business plan. What are the business objectives you want to achieve? What sort of partner are you seeking, i.e. company culture, personal chemistry, sense of commitment, etc. What are the absolute requirements and what will you compromise on?

If you already know the companies you want to consider, use your business plan to objectively evaluate the potential for the partnership arrangement. If you do not know of a business you want to align with, network through your professional contacts and associations to find candidates.

While none of us likes to document a relationship because the devil is always in the details, failure to develop a written agreement covering the operation of the strategic alliance will ultimately cause trouble. It is true that most partnerships fail eventually. And that will happen with any strategic alliance for lots of reasons. With a document that specifies what happens when the relationship ends, what triggers end, and how and when money flows between the partners, at least you will have some agreed approaches to get past the tough spots.

A strategic alliance like any other ongoing deal is only good if both parties benefit. An agreement where either party can end the relationship on 30 days notice is probably wise. An initial stated term for the working relationship is also useful. Maybe it begins as a two-year agreement with automatic renewals for some period subject to a 30-day cancellation by either party at any time. By setting a term of a few years, both parties can take a longer viewpoint in planning the working relationship.

These “outs” may sound pretty loose, but the whole purpose of the alliance is to benefit both parties and as long as everyone is happy, then time frames and ending arrangements are moot. The 30 day out acts as a brake on either party running rough shod over the other.

Because you are documenting a relationship that may include exclusivity and confidentiality aspects, as well as other details that can get sticky, you will need to have an attorney review the final agreement. But hold off on involving attorneys until you and the partner have documented the agreement to the best of your ability. Then let the attorneys at it; but beware of the tendency of the legal eagles to over protect a party, or inject other unpalatable stuff into the agreement.

Before you sign the final draft, go back to your original business plan and objectives for the relationship. Make sure you are achieving your goals and that you have developed a win-win working relationship with the partner.

A strategic alliance is not a merger or a buyout, but it can put your business on a faster growth trajectory if you get the right match. And who knows, maybe the strategic alliance will grow into something more. It could become a merger that someday provides the exit strategy for one of the partners—and lead to a happy result for both parties.

Here’s something worth trying this year: make ten New Year’s Resolutions that you actually track—and keep! I came up with ten different subjects for you to use as a framework for your personal list. They relate to four areas: management, leadership, finance, and personal. And I added a bonus one at the end. Here is the list.

Management

Delegate One Thing. Find ONE aspect of your responsibility that you can delegate to another team member. It should be something you don’t like to do that will “stretch” the recipient. Be sure to delegate the necessary authority.

Set and Track 2010 Objectives. Make your list more than just revenue and profit. Include specific, time phased goals that involve HOW you will achieve the primary revenue and profit goals. Do not forget to assign responsibility for completing each one.

Evaluate Your Website. Take an objective “third party view” of your current website. Does it still look good? It is your “front door” to lots of prospective customers. Take the actions needed to keep it current and competitive.

Finance

Take Vendor Discounts. Make sure your payables system is set up to take all discounts offered by vendors for quick payment and do it throughout the year.

Produce a Cash Flow Forecast. Do this every month or more frequently. Cash is always king and you need to treat the king well or he will punish you. Know when and from where your revenue is coming for several months out, and what your expected cash outflows are in future periods. These can be educated guesses based on historic records combined with actual accounts receivable and payable figures for close in periods.

Leadership

Listen More. This is tough to do. But your team members and your boss often convey messages within their words or by their body language. And it may occur in casual conversations, not in formal meetings.

Recognize Deserving Team Members. Recognition needs to be “public” and legitimate to be most effective. It does not need to be expensive. Often some time off is most appreciated.

Create Real Performance Plans. The people you lead need to know what you expect of them, and they will help you set their goals. Do this early in the year and tie recognition and evaluation to each person’s plan.

Personal

Schedule Your Own Time Off. You owe yourself and your family a regular break from the pressures of business. Weekly time, some vacation weeks, or some other regular down time is important. If you are the owner, your team expects you to take some time away. (They like the time in the office without you and they will surprise you by making good decisions in your absence.)

Learn Something New. What do you want to learn this year? Add to your skills, to your hobby, to your interests, etc. Running a business operation can sometimes become unexciting. If that is your situation, brighten your outlook with the challenge of learning.

Bonus

Smile More. Smiling is a simple solution to making life more pleasant. People will smile back. You will feel better. Make a resolution to be a pleasant person to be around. As a leader you don’t need to be popular, but you do need to be respected professionally. Projecting a positive confidence in a smiling manner is infectious and earns you respect.

So that’s my Ten for ’10. Maybe you have a different list and that is fine. Just make a list and review your progress over the year. Good luck and Happy New Year!

You are in the midst of preparing your 2010 plans, right? Setting objectives and making a budget have never been more important as the economy slowly begins to climb out of the Great Recession, as it is now called. Your approach to next year’s plan needs to be a little different since so much uncertainty remains.

The process of planning has always been more important to me than the product (plan) itself. That is because the process is where you think through alternatives and bounce ideas off of your planning partners. It is the time to ask the “what if” questions that lead to identifying options and contingencies. This year it is difficult to peer through the haze into the future because so much remains in doubt. Major government actions are bound to impact even the smallest business and probably the impact will be negative. But that is no excuse not to plan.

So here are some comments designed may deserve some deeper thinking as you prepare your plan.

• First, be sure that all your objectives and actions are “SMART.” They need to be Specific, Measureable, Attainable, have a Responsible person assigned, and include a Time requirement. You will be operating your business within a tight budget, and the SMARTer you are, the better chance you will have to accomplish things within budget.

• If you have a strategic plan that looks out several years and you have not revisited it in 2009, make that one of the first steps in your 2010 planning. Be sure your longer term goals are still valid and that your time frames for them remain realistic. If not, update them now so your 2010 detailed plan is in sync with your long term plan.

• Determine the breakeven point for your operation as it is currently staffed and also for the contingency that sales might vary by 10% up or down. If you cannot cover your breakeven point after a sales dip, what can you do to lower your expenses? Develop sidebar contingency actions for this and set a trigger point so you take action in time. Remember that for most businesses, labor is not a variable expense, although you may be able to shorten work hours and reduce pay somewhat, maybe you should simply cut headcount. What other expenses could you cut? Likewise, if sales grow how will you cope with additional workload? Overtime is often the best way until you are truly comfortable adding people. Contract labor is another way to do this, but be sure you are not mislabeling an employee as a contractor. That can cause serious tax and insurance problems.

• If you have not evaluated your customers individually for their contribution to your profit, that is a worthwhile exercise now. You may find that at the bottom of the list are some customers you would be better off without. They may cost you more than they are worth and it is time to “fire” them. If it is a large customer that may be hard to do. But a realistic discussion with them may enable you to raise your price to cover the loss they are generating. On the other hand, if you have too many customers costing you money or time you could spend more profitably elsewhere, then you need to examine your pricing and marketing to be sure you are focused on prospects that are good for your business.

• On the flip side, what are you doing to keep your good customers happy? Perhaps you should meet individually with them at year-end to thank them and to discuss their needs for 2010. You need to be market driven, not the other way around. Unless you are a really big business you cannot drive the market. Also, are you keeping TOMA (Top Of Mind Awareness) with them by “touching” them regularly with newsletters, direct mail, sales calls, etc. Sometimes we think such actions are only needed with prospects, but your 2010 plans should be protective of your current revenue sources, too. Remember your competitors will be trying to steal your customers’ business so do not take your customers for granted.

• What about a written marketing plan for 2010? The best way to do this is to determine what kind of a marketing budget you can afford and then devise the best way to allocate the money to generate business. Not enough businesses actually produce a realistic marketing plan. And few allocate enough money to really accomplish their plan properly. Consider manpower or the purchased services needed to execute the plan. And do not underestimate the challenge of coming up with the material needed to produce newsletters, brochures, an updated website, etc. Outside marketing firms rarely have the knowledge to do that for you. They will take your work and improve on it, but cannot do it all on their own. Once you have a plan and an idea of the manpower, post a calendar on the wall and mark in when each item in the plan is scheduled. Look that over and see if it is realistic. Can you do all that work? If not, then scale back to the things you can do. And do them well.

• Have you met with your loan officer recently? What actions should you build in the plan regarding finances? If you are being hounded by your bank, what other banks might want your business, and how will you go about making those contacts? Who do you know who can help?

Planning is much more than setting revenue and profit goals. That is easy. But determining the realistic actions that will get you to the goal is much more difficult. While I am not an advocate of letting the resource availability hamper creative thinking, at the end of the day, the plan needs to be achievable. If your actions require more resources than you can devote, then you need to devise a different approach.

Next year will be a challenge for most, but even if it is a cake walk for your business, you need to produce a “thinking person’s” plan, not simply an exercise that gets put away and never seen again. In my experience, if a plan is thoughtful and documented, it has a real chance of being met.

On the other hand, if you do not know where you are going—as the saying goes—any road will get you there.

It’s one thing to make decisions that affect others more than yourself; it’s another thing altogether to make a decision that has a profound effect on your own life. That’s the kind of decision my wife and I made in November 2006.

That fall we became the only members of our family remaining in the Philadelphia suburbs. We were living in the home we had occupied 27 years. For the first time since 1979 we had no family nearby—after always having live-in kids, parents in life care communities, or an adult child close. Our son and his family had recently moved from near us to Sudbury, Massachusetts, and our daughter lived with her family in Broomfield, Colorado. Both our parents had died and we found ourselves “home alone.”

We decided that it was time to move closer to our kids. But which one? Which of the two is least likely to move in the future? That’s a key question. The “winner” was our son and his family: our daughter-in-law, a 10 year-old granddaughter and a 5 year-old grandson in Sudbury.

Thus began a two-year process during which we projected a winter 2008-09 move-in date to a newly built home in a 55+ community in Sudbury. But it didn’t work out quite as planned.

In September 2007 while we were on vacation, a water pipe burst in our home ruining much of the first floor hardwood and causing extensive water damage to 28 years of “bits and pieces” stored in the basement where it had literally rained for 24 hours. The move decision time had arrived more dramatically and much sooner than I could have imagined! The flood precipitated (no pun intended) the Herculean task of cleaning out and dumping a lot of our accumulated stuff. Suddenly a year had been removed from our previously sedate schedule for downsizing.

The professionally done cleanup produced a home that, with a little more work and staging, would be ready to sell in the spring of 2008. So we moved our relocation schedule up, and in October 2007 picked a different home in the Sudbury 55+ community, one that was scheduled for March 2008 occupancy.

March 2008 proved to be only a guesstimate, however. With a horrendous 2007-08 winter in Sudbury, the closing date was slipped and slipped, but never more than for a few weeks at a time. And never with a true “date certain.” But we decided to put our house on the market in March 2008 and hope to sell it before we were forced to close in Sudbury.

Another decision was to price our house competitively, because the housing market was already softening. We were given excellent “intelligence” from our realtor, and set an attractive, but not a distress level price. We had about 20 showings in the first 8 days, received three offers, and ended up accepting an excellent one from very responsible buyers. We closed on the sale June 27. This seemed a positive omen regarding the decision to move to Sudbury.

But now we were homeless! The Sudbury closing date was vague—sometime in July. So we decided to store the furniture and live in a residence hotel in the Sudbury area. This gave us time to watch the progress on our home, plead for an earlier closing date, and finally occupy it July 23, 2008.

None of these many decisions really affected our lives as much as the actuality of leaving a familiar place after 29 years and making a fresh start in a lovely old New England town about 25 miles west of Boston.

My wife always has been more comfortable adapting to a new community than I have. We had moved 6 times before and I acquired a built-in set of relationships, since each time the move had been to take a different IBM job. I walked right into relationships at work. But I took a while to develop other relationships within the new community. My wife had to develop a new set of relationships in an unfamiliar community after each move and she learned how to do that.

This move has been different for me. No built-in relationships. Even though retired, I had been working part time as a group facilitator and executive coach in the Philadelphia area and had a string of connections a mile long. This kept me active and out of the house a good deal. But none of those relationships offered a built-in set of connections in Sudbury.

Of course one of the relationships we cherish most has now been restored: our grandchildren are 15 minutes away. Our grandson, now 7 and growing taller every day, had spent the first three years of his life literally in our arms several times a week. Then he moved with his parents and older sister to Sudbury. Only 3 years old at the time, he could not understand why he could not see Grammy and Granddad each week. He never got past that and so our move here has been a good thing for him and for the others as well. Tommy visits a couple of times a week after school and stays for dinner. I’m not sure who likes it more: Tommy or his grandparents. We have a lot of fun together.

Fortunately my hobbies and interests have helped me meet folks in the Sudbury area. Contrary to what you might expect in a traditional New England town, the people are warm and welcoming, and happy to include us in their community activities. As an experienced choral singer blessed with a first tenor range, my voice is appreciated in a 90-member chorus and in a small church choir. As a photographer, I enjoy the opportunity to have my work judged in one camera club, and show my work in another. Field trips with photographers also have proved enjoyable and educational. I also have continued as a Crown Financial Ministries Money Map Coach helping financially stressed families develop spending plans and pay down debt so they can become financially free. The calls for help come from people almost daily.

I am still looking, though, for something more that will take me out of the home during the day. While I maintain a telephone coaching role I greatly enjoy with company owners, I would also like to find a reason to be out of the house more in the daytime.

The question now is just how serious am I about that? Joining a chamber of commerce is a possibility, but that assumes a commitment to build a coaching/consulting business here, and I’m not sure I want to make that “investment.” A volunteer role that can use me effectively is another possibility and I need to explore that more seriously.

I must admit, however, that I enjoy the luxury of consuming two cups of coffee, the Boston Globe and the Wall Street Journal each morning. And I am shooting some interesting outdoor images around New England. But that is not the same as developing something self-challenging outside the house.

A string of decisions have led us here to a great home where I no longer concern myself with snow removal, leaf raking, lawn mowing, etc. I could accept this new status quo and enjoy a low pressure life—that’s one decision. But those who know me understand it would not suit me for long.

Decisions, decisions. I still need to make more of them. It’s certainly a do-over time for me after 29 years in one place. And it’s a significant change. But change seems to be in the wind in 2009. And I like change. Stay tuned!

PS: Any suggestions?

Some readers have asked me to write a more personal blog—to write more about my activities, etc. So these blogs fit that genre. Perhaps these entries, which are about my life and activities, may be of use to readers. If not, please don't waste your time reading them!

This blog is for you...if you are the owner of a privately held business and are looking for some thoughts and suggestions that I hope will make your business better. I will try to make entries on a regular basis and welcome your comments in the blog. People have different experiences and opinions and sharing those in this blog will be helpful to everyone.

If you have any questions or want me to post an entry about a particular topic, please email me at denbrook@comcast.net.

Small business is fun...most of the time, right?

Let's talk in this blog about how to make it more fun, and also more rewarding...however you calculate your reward!

Bob