Tag: business

Categories
business

A Five Dollar Problem Or When Was The Last Time You Thought About Your Business Trifles?

A 5 Dollar Problem Or When Was The Last Time You Thought About Business Trifles? - Small Business Blog Today in college (I do this two nights every week, remember?) we had a guest speaker. She was telling us about a failed 20-year old family business that served big-name clients. There was a CEO, his niece – a brilliant sales person who worked there for 10 years and CEO’s 20-something son with MBA and lots of ambitions. The niece was asked for Excel spreadsheets with her sales numbers, but she wasn’t too bright about that. Her specialty was selling – not spreasheeting. Eventually, the pressure from stiff CFO, the MBA-flaunting kid and her CEO uncle for those damn spreadsheets and numbers got so heavy that she left the company and took half of their clients with her. Rule number one – don’t mess with your sales people.

I call this a Five Dollar Problem, and here’s why. I happen to know just this type of sales person – bright, ambitious and persuasive. As I say – she can sell you snow in a winter and you gonna come back with your whole family asking for more. But she’s not good with anything that has to do with numbers, including computers. In fact – she doesn’t know how to use one. Trust me on this one for I tried so many times – and as many times I’ve failed. Her usual response is: “I don’t need to know computers, I have my husband for that” (yes, I’m talking about my wife). So when she was working in one elaborate place she (along with other workers) had to punch in her time sheets, how much time did she spent with each clients and what procedure she performed, what product she sold and so on. The regular spreadsheeting, you know. While being the most computer illiterate lady in New York save Statue of Liberty, she immediately figured out the solution to her problem. She was paying 5 dollars every week to their receptionist – a really nice college girl, who did my wife’s time sheet in less than 5 minutes.

Business owner was happy – she got the numbers she needed. My wife was happy – she didn’t have to struggle with those “complicated computers” every weekend and could get home earlier. And the receptionist girl was happy – she got every Saturday lunch for free. All it took to solve this problem is 5 dollars. Thus a name – a Five Dollar Problem. Meaning – the cost of solving this problem is exactly five dollars.

It is exactly the same problem as our guest speaker had presented. The problem that delivered one of the major cracks in the foundation of a 20-year old business. But rather than being demotivated, as we all get when we ask to submit to spreadsheeting, she solved the problem in a classic win-win scenario. It definitely didn’t break a business, it didn’t cost the business half of the clients, it was just that – a Five Dollar Problem.

Categories
business

Small Business Issues – 7 Areas To Expect Most of The Trouble

While my fascination with Google Wave is settling I want to go back to what this blog is all about – small business. It’s no secret that most of small businesses concentrate on surviving and becoming profitable. News are full of glamorous stories about glorious start-ups. In real life there are thousands of less known ventures and businesses that are alive and kicking – every day. Success of a small business is, indeed, in moving from failure to failure. As long as each failure results in small business owner learning valuable lesson.

We have recently completed a company analysis for $1.5M business. Scratch that. Recently we have completed an analysis of 10-year old successful company that had just found out they are worth well over a million dollars. They though their worth was around $200K and they treated their business as such. Problems we have uncovered and presented to the owners are not uncommon. Even more so, I would dare to say that most small business’ problems are falling under one of seven main categories:

1. Business owner/Leadership issues. Business owner may lack vision, being stuck in a day to day routine. Business owner may, on the other hand, have too broad a vision, trying to compete in all areas at once. Either way business looses.

2. Human Resources issues. Speaking of small business owners it is always hard for the owner to find a person they can trust. Money are tight, there’s never enough time so the owner is convinced that any new person will not be a good fit for the company. Maybe some time later. Being able to delegate solving secondary problems is a virtue not many small business owners possess.

3. Innovation issues. Most of the businesses are shy of innovation because they shy of money. Or so they think and so they say. In some cases it might be true. However in most cases innovation (not necessarily technological – it could be just a different approach to sales) is the ultimate source of  company’s strategic growth. Just because it was working before – doesn’t mean it will work the same in the future. But even if it will – would you rather make the same money or double that?

4. Marketing and sales issues. Most people create their business because they know how to do something, not how to sell it. They think once they start offering their services people will come. People will, indeed, come – to those who can sell to them. Not knowing how to market themselves, small business owners fail to capture their strategic share of market. Around 75 to 80% of business owners cannot price their services or goods properly.

5. Operations and logistics issues. This area is so broad that I would probably have to create another post just for that. Most small businesses fail to understand the importance of the fine-tuned operations. Maybe you spend too much time going to suppliers when for little extra money you can have them deliver to you – while you be making much more money rather than putting your business on hold. Or maybe your people are doing the double work by filing documents in both paper and electronic forms. Or maybe there is something else. Time is the most scarce resource that you have, and operations issues are the biggest time waster.

6. Legal issues. This is a can of worms of its own. Do you have all the licenses you need to run your business? Are you covered in all states and counties you operate? Do you have insurance that will cover you in case something happens? Have you filed all your tax reports on time? You may be surprised at how tricky these things can be.

7. Financial issues. This is the item most of business owners would have put first, so I am deliberately putting it last. You think you have money problem? You might be right. The reason for that is that you are having some of the issues from the list above on your hands. Either way you are not collecting enough sales, or your expenses are too high, or both. Unless, of course, your business model is flawed, but that’s whole another story.

So what is the outcome of the analysis that any small business should do? Identify the most flawed areas and fix them – one by one. Don’t wait, don’t put major things off – the larger the company the harder is it to change things there. So start early, move fast. Today is a good day for change.

Categories
business

Credit Companies Want You To Fail!

Credit Card Companies Want You To Fail Last week I got two letters – one from GE Bank (that provides credit services for Lord & Taylor) and one from Chase. Both were somewhat apologetic and notified me of the credit line cut. In fact, they cut it so much that the credit limit is barely above the balance on the card.

Now, I don’t claim to have a credit score of 900, but it was a decent enough score, especially for a current economy. With lines cut like these, my credit score will undoubtedly plunge – because the integral part of it is an available credit to total credit ratio. As you can see, with a simple move two credit providers have just destroyed about 75 to 100 points of my credit score.

What does it mean in a long run? Well, I expect some more credit cards to do the same (although I don’t have that many anyway). That should bring my credit score down even more. Inevitably, some of the credit lines will get so close to the balance that cards get accidentally overdrawn. That pushes the score even further down. In a two to three months I expect my credit score to nosedive by no less then 150 points, with even more diving in the following months. There’s almost nothing I can do  to prevent that. Obviously, if I was capable of paying off all the balances – I would have done that a long time ago, but I would still need some credit for operations anyway.

So what these credit companies are looking at is in approximately 3 to 4 months driving my credit score down so much that I would stop caring about it. Then, an interesting thing happens – once you stop caring about your credit score, you realize that you can just stop paying credit cards, free up a lot of cash, stop answering calls from credit card companies for about half a year (imagine all the cash you can save by then), wait until your debt is sold to a collection agency, wait out a little longer and then make a deal on paying off just a fraction of the initial debt.

Once you’re done settling (even before you’ve paid off your balance) – your credit score will start to raise, in about a year you’re back to the previous numbers without the debt and with whole lot of cash. Credit company looses, you win.

Now tell me – what’s the rationale behind the initial action of the credit company to cut the credit line of an individual (or a business) that makes all the payments on time and always pays significantly more then a minimum payment? Does it all make sense? From my point of view – it doesn’t.