Monthly Archive for April, 2009

For small business, Cash is no longer King – it’s the Emperor

For generations, business owners have learned that while Profit may be the Queen of business, Cash is King. And there is never a moment in the life of any business, large or small, when this generally accepted truth doesn’t apply. But in 2009, or anytime the economy slows, small businesses must elevate Cash to an even more supreme level. Consequently, these days, and for the foreseeable future,

Cash is Emperor.

Any Questions?

Blasingame’s 3rd Law of Small Business states: “It’s redundant to say, ‘undercapitalized small business.’” There are at least two reasons this statement is a law and not a maxim:

1. In every small business, there is always a place to put whatever capital may be available.

2. Small businesses typically have only three sources of capital: a) Retained earnings – profits left in the business; b) Bank loans; c) Investment capital, most of which comes from the owner.

Because of the impact of Blasingame’s 3rd law, any cash in a small business is precious and, therefore, availability must be maximized.

There are many fundamental best practices that can be executed to maximize cash. Here are a few:
- Sell at a gross profit margin that will more than fund operations.
- Manage expenses like a she-bear guards her cubs.
- Manage accounts receivable like your life depends upon it – it might.
- Establish and maintain a close relationship with a bank.
- Re-invest as much of the profits back into the company as possible.

Recently on my small business radio program, The Small Business Advocate show, I interviewed three top experts on cash management and capital acquisition. First, Gene Siciliano, author of Finance for the Non-Financial Manager, second, Joe Knight, author of Financial Intelligence for Entrepreneurs, and finally, Tom Markel, founder of Be sure to take a few minutes to listen to what these three world-class cash management experts have to say about this critical small business management fundamental. And, of course, be sure to leave your own thoughts.
For Gene Siciliano: For Joe Knight:
For Tom Markel:

    Generations working together without creating a casualty list

    When I first entered the marketplace, lo those many decades ago, all I could offer my new employer was what I learned in school, my best application of brainpower, youthful energy, a willingness to learn and a good attitude. In other words, I was a blob of clay ready to be molded into something useful by an older, experienced person who took the time to teach me. And until that transformation took place, my value to the company was pretty much as a warm body. In those days, late 60s - early 70s, there weren’t a lot of paradigm shifts taking place or new technology being introduced.

    For the past decade and a half, the new generations have entered the marketplace at a time when paradigms are shifting in all quadrants and technological innovations are coming on-line faster than a woman changes handbags. And these kids are either the early adopters of the new orders and/or are actually causing the shifts. Consequently, when Gen Y and Gen X showed up for work the first day, they not only knew stuff that could benefit the company day-one, but they would likely know more about some things than their employers, thereby becoming the trainer instead of the trainee, at least part of the time.

    This new dynamic between the generations has created both opportunities and challenges. For example:

    1. The acquisition of these talented young folk has produced great advantages and increased productivity for millions of 21st century businesses, large and small.

    2. The convergence of the technological and sociological worlds has created a new digital dimension in which older generations often feel like aliens, but where Gen X and Gen Y are clearly high-functioning natives.

    3. Baby Boomer managers would do well to embrace and leverage the new ways and bright young minds.

    4. With all of the new and exciting stuff, classic marketplace behaviors and fundamentals, including ethics and industry best practices, are still valid; and younger employees would do well to respect and value what the more mature generations can teach them.

    Recently, on my small business radio program, The Small Business Advocate Show, I interviewed two of my Brain Trust members who have been studying this new dynamic between the generations. First, Mike Muetzel, author of, They’re not Aloof, Just Generation X, and then Donna Fenn, author of the upcoming book, Upstarts! How Gen Y Entrepreneurs are Rocking the World of Business. Take a few minutes to listen to what these two experts have to say about this very important and contemporary topic. And, of course, be sure to leave your comments.
    For Mike Muetzel:
    For Donna Fenn:

    Small business and the wonderful world of niches

    One of the things Sears Roebuck became famous for is their Craftsmen tools, especially their socket wrenches, which are mechanical wrenches. Once, when I was buying one of these wrenches I was confronted with options of “Good,” “Better” and “Best,” a strategy for which Sears is also famous. When I asked about the difference between the Better and Best models I was told that the Best model had more notches, or teeth, inside the mechanism. This would allow for finer adjustments to be made when tightening a bolt or nut. Plus, in a tight situation, the extra notches make the Best model work, well, best.

    For the past 30 years, the marketplace has increasingly become like that “Best” socket wrench; every year, it acquires more notches. Except in the case of the marketplace, notches are called niches (I prefer “nitch,” but some say “neesh” – tomato, tomahto). And just as increasing the notches in a mechanical wrench allows for finer adjustments, niches create finer and more elegant ways to serve customers, which they like – a lot.

    As niches within industries have increased, so have entrepreneurial opportunities resulting in the most dramatic expansion of the small business sector in history. It’s difficult to say which one is the egg and which is the chicken: Are entrepreneurs taking advantage of niche opportunities as they present themselves, or are entrepreneurs carving out niches in the process of pushing the envelope of an industry? The answer is not either/or, it’s both/and.

    Webster defines niche as, “a place or position perfectly suited for the person or thing in it.” If ever a concept was “perfectly suited” for something, it is the niche and a small business. Indeed, as one small business owner creates a new niche today, another is taking this practice to the next level by creating a niche within a niche. It’s a beautiful thing.

    As I consider the direction of the marketplace in the future, I don’t see more mass marketing, mass media or mass distribution. I see more niches. Don’t worry; business models based on “mass” anything aren’t going away anytime soon. But they won’t grow like niches will. And that’s nothing but good news for small business and the reason why I’m so excited about the future of entrepreneurship in the 21st century. Because more niches means a healthier small business sector, which I happen to believe is also good for the world.

    Recently, on my small business radio program, The Small Business Advocate Show, I talked with my friend and Brain Trust member, Rebecca Boenigk, about her company’s niche. Founded by her and her mother, Rebecca is president of Neutral Posture, which makes REALLY comfortable and ergonomically correct office chairs - the kind business people sit and work in all day. Rebecca says that her business is doing just fine in 2009 because her company fills a niche, instead of trying to be all things to all people. Take a few minutes to listen to what this niche expert has to say about how her 75-person American small business manufacturer is taking on this recession, as they simultaneously celebrate the company’s 20th anniversary. And be sure to leave your own thoughts.

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