Archive for the 'Business planning' Category

Beware the many faces of fear

Published
by
Jim Blasingame
on December 13, 2011
in Business planning, Entrepreneurship and Future thinking
. 0 Comments

Anyone who has contemplated forsaking the perceived, if not real, security of employment to start a small business has come face-to-face with the fear of failure.

Indeed, countless would-be entrepreneurs have discontinued their self-employment pursuits for fear of losing too much-the risk being just too great.

But if you pushed through these concerns and actually became a business owner, you know that this isn’t the last time you’ll experience fear. And time will teach you that fear can actually be a good thing.

But if you pushed through these concerns and actually became a business owner, you know that this isn’t the last time you’ll experience fear. And time will teach you that fear can actually be a good thing.

Remember these two things about fear: It’s a shape-shifter, capable of appearing in many forms. Successful entrepreneurs learn how to recognize and deal with fear it in all of its shapes.

Let’s take a look at some of the manifestations of fear, followed by what each one might sound like.

First on the list is the mother of all fear - unremitting, cold sweat, cottonmouth fear in its default entrepreneurial shape: “What if I can’t cut it as an owner?”

Terror: “What if I’m buying the wrong business?”

Fright: “What if I order all of this stuff and no one buys it?”

Panic: “What if my pricing for this bid is too high-or worse-too low?”

Dread: “I hate it when I have to fire an employee.”

Trepidation: “I need a business loan; what if the bank won’t let me have it?”

Anxiety: “How will I ever be able to compete with the Big Box competitors?”

Shock: “What do you mean our best customer signed a contract with a competitor?”

The best way to minimize-if not eliminate-these fears is through performance. But performance only happens when you use the fear-fighting tools: awareness, knowledge, experience, training, planning, preparedness, decisiveness and execution.

Armed with the fear-fighting tools, fear can become manageable and a productive stimulus that actually can create opportunity. But if you don’t use these tools, the fear you feel is probably well founded and giving you good advice.

The only way to make sure your fear is a motivator and not an immobilizer is through performance. And small business performance only happens when you’re armed with the fear-fighting tools.

The fear-fighting tools help you replace fear with its archenemy, total confidence.

Check out more great SBA content HERE!

The future is bright for niches

Published
by
Jim Blasingame
on September 20, 2011
in Business planning and Management Fundamentals
. 0 Comments

Prospective owners of Craftsmen socket wrenches can choose from the classic, good, better or best models.

The “Best” wrench has more notches, or teeth, inside the mechanism, allowing for finer adjustments when tightening a bolt or nut, plus in a tight spot, 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 marketplace, notches are called niches (I prefer “nitch,” but some say “neesh” - tomato, tomahtoe). And just as more notches in a mechanical wrench allow for finer adjustments, niches create finer and more elegant ways to serve customers, which they like - a lot.

As niches have increased in number, so have entrepreneurial opportunities, resulting in the most dramatic expansion of the small business sector in history. It’s difficult to say which is the egg and which is the chicken: Have entrepreneurs taken advantage of niche opportunities presented to them, or have they carved out niches where they saw previously unrealized opportunity? 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 identifies a new niche, another is creating a niche within a niche. It’s a beautiful thing.

Rebecca Boenigk (Bay-nik) is the president of Neutral Posture, Inc., a Texas small business she founded with her mother to build office chairs. Rebecca told me Neutral Posture has been successful because they fill a niche - REALLY comfortable, ergonomically correct and not inexpensive office chairs - instead of trying to make chairs for every person and price-point. In the 21st century, Rebecca’s story is legion.

In the future, there will be less mass marketing, mass media and mass distribution. But there will be more niches - lots of new niches. And while “mass” business models aren’t going away anytime soon, they won’t grow like niches. And that’s good news for small business and the future of 21st century entrepreneurship.

More niches means a healthier small business sector, which I happen to believe is good for America and the world.

Be the “BEST” by creating and serving niches.

For more of what I have to say on The Small Business Advocate Show about the success of finding a niche for your small business, click here and listen or download.

Access more great SBA content HERE!

Beware the Concorde Fallacy

Published
by
Jim Blasingame
on September 13, 2011
in Business planning
. 0 Comments

In 1956, the Supersonic Transport Aircraft Committee met in England to discuss building a supersonic airliner by British aircraft and engine manufacturers and the government. The project - named Concorde - moved forward, and in 1962 France joined the group.

When the wheels came up on the first Concorde commercial flight in January 1976, the enterprise was already plagued by prohibitive cost overruns. By the last Concorde flight in 2003, the Anglo/French financial misadventure had become legendary. The good news is it produced a handy metaphor that covers valuable business lessons.

Evolutionary biologists coined the term, “Concorde Fallacy,” as a metaphor for when animals or humans defend an investment - a policy, business, or nest - when that defense costs more than abandonment and an alternative. Four centuries before Concorde, in Part One of Henry IV, Shakespeare’s Falstaff expressed it this way: “The better part of valor is discretion.”

Here are two lessons associated with the Concorde Fallacy.

  1. The “sunk costs” lesson. When the financial viability of an enterprise is questionable going forward, any decision to continue should not be based on what has already been spent. The Concorde partners learned this lesson 27 years, and lots of taxpayer money, too late. For a small business, this sounds like, “We’ve got too much invested …” or “If we just work harder …” or “We just need more time …” When it’s not working now, you have to decide when to pull the plug.
  2. The “Pride goeth before destruction” lesson (Proverbs 16:18). Emotional attachment to Concorde, and sovereign pride of the English and French governments, caused the willing suspension of economic reason.

In small business, pride can be a productive motivator - but it can also be the problem. A mentor once posed a handy question to me that I’m going to call the “Concorde Question, “Do you have a fighting chance or just a chance to fight?”

Perhaps the hardest decision a small business owner ever faces is when to end a business pursuit, whether a new product, acquisition or - and this is the mother of all anguishing decisions - to close the business.

The reason for the anguish is because for every entrepreneur who succumbs to the Concorde Fallacy and stays too long at the dance, there is one who pushed on, one more day, and found success. Being a small business owner isn’t for sissies.

I talked more about lessons learned from the Concorde Fallacy on my radio program, The Small Business Advocate Show. Take a few minutes to click on the links below and listen. And, as always, let me know what you think.

Beware the Concorde Fallacy with Jim Blasingame

Lessons learned from the Concorde Fallacy with Jim Blasingame

View other great SBA content HERE!

Commercial real estate leasing: Part II

Published
by
Jim Blasingame
on July 25, 2011
in Business planning and Real Estate
. 0 Comments

This is the second of a two-part series on leasing commercial real estate for your small business. Last time we talked about how to start the due diligence process of narrowing your search down to two or three options. Let’s wrap this up by focusing on the final steps.

In the first stage, you built a comparables spreadsheet and started populating it with basic information for each property, like square footage, base rent, notes, etc. Now we’re going to finalize the expense picture by identifying who pays for what.

There are three classic lease structures: net, net-net and triple net. But the leases you’ve been reading won’t actually say “net lease.” The type is determined primarily by how expenses are allocated.

  • A net lease means the tenant pays the base rent and possibly some or all of the utilities. This is the simplest and most common lease, and the easiest to evaluate. Be sure to ask how much to expect incremental expenses to be, so you can build that into your comparison.
  • A net-net lease has the same elements as the net lease, plus the tenant will typically have some maintenance and replacement expenses, as when an air conditioning compressor goes out. Like the net lease, estimate what these extra expenses will be for comparison and budget purposes.
  • A triple net lease means the landlord is merely making the building available, and all expenses associated with that availability are obligations of the tenant. This includes insurance and property taxes, plus all maintenance and replacement. These are long-term leases, such as 20 years.

Of the different properties you find that work for you, it’s likely that one will be offered as a net lease and another as a net-net. The net lease base rent will be higher, because maintenance, etc., is not included in the net-net lease base rate. This is where your spreadsheet pays off, because it reveals the total annual lease expenses for each property, regardless of the lease structure.

Every property has maintenance, grounds keeping, utilities, insurance and taxes that someone has to pay for. So don’t sign a lease until what you’re responsible for is spelled out, in plain English, in the lease. Also spell out who is responsible for getting the work done.

Just like in the 1st grade, when negotiating a commercial lease, there are no dumb questions. And let your attorney look at the lease before you sign.

Don’t sign a commercial lease until you know the total annual expense. Good luck.

Should your business change its DNA?

Published
by
Jim Blasingame
on July 14, 2011
in Business planning and Legal
. 0 Comments

In nature, all life comes in two forms - plant and animal.

In the marketplace, all business entities are found in two forms - human and non-human. But unlike plants and animals, a human business can morph into a non-human entity.

The human businesses are sole proprietorships and partnerships. Of the non-human entities, there are three: C Corporation, S Corporation and the Limited Liability Company (LLC).

So why should your human business morph from human to non-human? There are three excellent reasons:

  1. To acquire certain tax advantages. Talk with your accountant about this.
  2. The “corporate veil” provided by a corporation or LLC can shield personal assets from legal obligations or claims on the business. Talk with your attorney about this.
  3. Many larger customer prospects won’t take your business seriously as a vendor unless you are a corporation or LLC.

If your business is very small, you might be able to spend the incorporating expense - $500 to $1,000 - on something more immediately critical, like a computer or marketing. But one concern is that you might wait until it’s too late. Here are three organizational and operating triggers that should help you decide when to morph from a human to a non-human entity.

  • When you hire the first employee.
  • When you enter into contracts on behalf of the business.
  • When you establish any credit, including with vendors.

Non-human entities do require maintenance to be able to sustain the benefits against outside interests. Here are a few critical maintenance tips:

  • Tell EVERYONE that your business is formed as a non-human entity.
  • Identify the legal ownership designation (like Inc., or LLC) on all documents, signage, etc.
  • Operate the legal entity’s finances completely separate from personal activity, especially checking accounts.
  • Maintain proper corporate documentation, like shareholder and annual meeting minutes.

And finally:

  • Don’t forget the triggers.
  • Be proactive, not reactive, about your entity.
  • Keep up the maintenance on your non-human entity.
  • Business entity laws vary by state.

Your business is not a plant; you can change its DNA.

Recently on The Small Business Advocate Show, I talked more about the legal structure of small businesses. Take a few minutes to click here and listen. As always, tell us your experiences in changing the legal structure of your small business.

Build strategic alliances for sales growth

Published
by
Jim Blasingame
on April 12, 2011
in Business planning and Strategic alliances
. 0 Comments

There are three management disciplines which, while not new, have a heightened level of importance for success in the 21st century: Leveraging technology, networking and building strategic alliances.

No doubt you’ve become more proficient with the tech stuff. And who isn’t a better networker today than 10 years ago? But can you say you’ve nailed the partnering thing?

When small businesses come to the end of their resources of people, assets, technology, cash and credit, they have to do something as primordial as when Og asked Gog to hold the chisel while he carved out his new stone invention that looked a lot like a donut. They have to seek alliances.

Answer these questions: Is your business growth hampered by a lack of people, capital or other assets? Would you like to bid on a request-for-proposal (RFP) that has specifications beyond your company’s ability to perform? Are you reluctant to ask a large customer about their future plans for fear that your organization may not be able to step up to the answer? ___(Your lament here)___.

If any of these – or variations thereof – are way too familiar, consider one or more of these three alliance examples, in descending order of formality.

Partner
A partner relationship is more formal and typically longer term. Regardless of how it’s structured, in general, all partners have a vested interest in the success of the entire enterprise. Think of two business owners buying a commercial duplex and sharing the space because neither has the cash or credit to swing the deal alone. Most partnerships are best organized with the help of an attorney.

Sub-contractor
By definition, a sub-contractor becomes a contractual participant you bring in to help fulfill a larger project for which you are the lead vendor. Unlike a partner, a sub expects to get paid for delivery of work or products regardless of how the project turns out.

Strategic alliance
Here’s an informal strategic alliance example. Let’s say a jeweler, florist and photographer join forces to produce a marketing/advertising campaign for brides that represents all three brands. After the campaign is executed and paid for, the participants may have no further connection.

Before giving up on a project because you don’t have the in-house resources, look around for ways to create alliances that could allow you to take advantage of that opportunity.

If Og the caveman can create an alliance, you can too.

I talked more about the 21st century business practice of creating alliances this morning on my radio program, The Small Business Advocate Show. Take a few minutes to listen and leave your best practices on creating strategic alliances.

How good are you at building strategic alliances? with Jim Blasingame

For more information on building alliances to grow your business, click here: Strategic Alliances.