Wednesday, November 26, 2014

EMAIL--Tricks to Get Them Opened and Read

image This article was written by Barry McKinley, SCORE Orange County Business Mentor

The average number of business emails received a day is 121 with estimates that will go to 140 by 2018.Emails continue to be an effective way to communicate with business associates, and potential clients. But because of poor design few get opened, read or acted upon. Developing and sending successful emails is no different than creating an impressive sale pitch. It takes time and some knowledge.

First of all you need to get the reader’s attention (always have a subject), a few attention grabbing examples;

“I’ll be honest with you”

“Let me start with an apology”

“I’ve completed my research for you”

“You’ll think I’m crazy”

“The rumor is true”

“Quick question”

The email needs to be short and sweet. More details can be given in a link or after the entire eye-catching facts have been given. Research has shown that long emails don’t get read.

Don’t’ waste space and the readers time on small talk, i.e.“How is your summer going? You’re certainly having great weather”, etc. 65% of all emails are first opened on a smartphone. So for the mobile viewers, keep your paragraphs short and snappy with lots of white space. Using bullet points or a numbered list is very effective.

Be sure in sending your email you use only the receivers name. Group emails instantly sends the message that they are not important and this is going to everybody. The most effective times and days to send emails are 2-5 P.M., Tuesday, Wednesday or Thursday. Mornings, Mondays and Fridays are normally hectic times so the reader has far less time to look at or read your email.

The most effective emails also ask for a response with a deadline, “Let me know by 5:00 tonight”. In sales this is known as the “Call to Action”. Without a deadline it is easy for the reader not to respond, put aside or delete.

Humor can be effective in a business email; the attached example normally gets a response rate of higher than 45%

Subject: Quick Question

Hey Sally-

I haven’t heard back from you and that tells me one of 3 things;

1) You already chose a different company for this, and if that is the case

please let me know so I can stop bothering you

2) You’re still interested but haven’t had the time to get back

to me yet

3) You have fallen and can’t get up – in that case let me know and

I will call 911

Please let me know which one it is because I am starting to worry . . . Thanks in advance

Cheers, Barry

To summarize how to write effective attention getting emails, follow these simple guidelines;

1. Always use attention getting Subject Headings

2. Send on the days and times that are most effective

3. Don’t list multi receivers

4. Keep it short but interesting

5. Be clear what you are asking for

6. Ask for a response

7. Give the reader a deadline to act

8. Write fewer emails

Buying A Home Based Business Part 10: Disaster Planning

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This article was written by Mike Capsuto, SCORE Orange County Business Mentor

“Backup my hard drive! How do you put it in reverse?” Unknown

Owners of newly acquired home businesses spend their time making the business grow at a profitable rate with little thought to potential disasters. Could your business survive if it was down for a day, a week, a month or longer or had a loss of a major supplier or customer? Here are some startling facts:

• According to the National Fire Protection Association, 381,000 residential fires were reported in 2012 causing 9.8 billion dollars in property loss. Sixty percent spread to areas other than the area of origin.

• The FBI estimates that 10% of all laptops purchased in the US will be stolen within the first year of ownership. Of those, only 3% will be recovered. It took businesses an average of 9 days and $49,000 in lost sales, replacement cost etc. to get operational again. In addition, 7 million smart phones were reported lost in 2011. Many were loaded with or had links to critical business data.

• Google reported 1 out of 14 hard drive crashes within 3 years.70 percent of small firms that experience a major data loss go out of business within a year.

• A Microsoft Security Intelligence Report estimated that 16 million new viruses are generated every two years.

• Based on the Council for Disability Awareness risk calculator, a healthy male age 35 has a 21% chance of having a disability lasting over 3 months before reaching the age of 65. The chance is 24% for a female in that same age group. The percentage increases by 14% for both males and females if they are overweight or use tobacco.

• The National Highway Safety Administration estimates that 2.4 million people are injured in automobile accidents each year.

• Over 47,000 business and 1.2 million non-business bankruptcies are filed annually according to the U.S. Courts.

• A study developed by the University of Minnesota found that a business which was put out of commission for as little as four and a half days, experienced up to a 50% loss in its capacity to operate.

What would happen to your livelihood if any of above adverse events were to occur?A disaster can happen the moment you take ownership of the business. Can you get your business back up and running quickly? Disaster threats are inherent part of being in business. They can be managed and their adverse events can be lessened through proper risk management.

Threat Sources

The first step in risk management is identifying the sources of threats. Threats can arise from natural disasters, auto accidents, risky personal activities, tax or regulatory changes, projects the business undertakes, failures in maintaining financial records or quality products, disruptions to operations from fire or power outages and family emergencies. These factors are not dangerous unless there is a corresponding business risk.

Risk Assessment

Next identify the risks that can occur within each source. Risks can include fire, burglary, arrests, data loss, or bankruptcy of a major customer or supplier. Once the risks are identified, assign a probability of occurrence such as high, medium,or low to each one. A high risk is likely to happen. A low risk is unlikely to occur.

Determine the Recovery Window

Key measures of the risk is the severity of the recovery time. The longer the recovery time the greater the impact to business operations. Most home based businesses have great difficulty recovering if the business is down for more than 3 days. Rate the recovery window as low, medium or high. If the business can recover within one day rate the recovery window is low. If it will take more than 3 days rate the recovery window as high.

Preventative Measures

Whether the risk is rated as high, medium or low, each risk requires an evaluation. Low risks with high or low recovery windows has the option of either accepting as is or doing some preventative measures. High risks with high recovery windows requires immediate attention. Others should be taken care of as soon as possible. Methods of reducing the impact of risks include avoiding risky activities, buying insurance against the risk or assigning the corresponding activities to a partner, supplier or creating a separate entity to handle the risk. The following brief scenario outlines the application of the above steps.

RB is a healthy 35 year old male. He weight lifts at the local gym three days a week. He also plays golf once during the week and on Saturday. After each golf game he has a few drinks at the golf club with his golfing partners and drives home. His home is over 20 years old and his office is in a room next to the kitchen.

Identifying the Threat

Risky Personal Activities:

• Weight lifting

◦ Risk assessment: Back injury

◦ Probability of occurrence: Low

◦ Recovery Window: High; > 3 days

◦ Preventative measures: Wear back brace; reduce weights; obtain disability insurance; business continuity insurance.

• Drinking and driving

◦ Risk assessment: Auto accident, DUI arrest, injury, loss of reputation. Legal fees, fines and bail could cost $10,000, more if property damage or personal injury to others are involved. This is money the business could use.

◦ Probability of occurrence: Medium (higher than a non-drinker; could be rated high if there is a history of drinking and driving, traffic violations or auto accidents).

◦ Recovery window: High, > 3 days, longer if convicted of DUI.

◦ Preventative measures: Carpool with a designated driver, stop drinking.

Home Emergencies:

• Proximity to kitchen:

◦ Risk assessment: Fire (most fires start in the kitchen and migrate quickly to other areas).

◦ Probability of occurrence: Low

◦ Recovery Window: High; > 3 days

◦ Preventative measures: purchase fire extinguishers; move office to other remote parts of the house; obtain fire and business continuity insurance;

• House over 20 years old:

◦ Risk assessment: Electrical fires; power outages.

◦ Probability of occurrence: Medium (most older homes are not electrically wired for the power requirements of a home based business and could result in fires or power outages).

◦ Recovery window: Medium < 3days unless there is a resulting fire.

◦ Preventative measure purchase fire extinguishers; rewire the house or office; obtain fire and business continuity insurance, obtain a backup power source.

The danger to home based businesses the business assets and records are normally in one location and the business is focused around one individual – the owner. An adverse event resulting from seemingly harmless activities can severely impact the ability of the business to operate. Sound risk management reduces the chance that a particular event will occur and, if it does, good risk management can reduce its impact and protect the business wealth.

Starting Your Business the Right Way

image This article was written by John Rau, SCORE Orange County Business Mentor

There are dozens of sites on the Web that have checklists that remind you of the many tasks you should perform before you open the doors to your business. The real importance of these checklists is to help you remember a lot of important steps that you might otherwise overlook. For example, the U.S. Small Business Administration (SBA) has provided a listing of the “10 Steps to Starting a Business” (see http://www.sba.gov/content/follow-these-steps-starting -business) which is summarized as follows:

 

 

Step 1 Write a business plan

Step 2 Get business assistance and training

Step 3 Choose a business location

Step 4 Finance your business

Step 5 Determine the legal structure of your business

Step 6 Register a business name such as “Doing Business As”

Step 7 Get a tax identification number

Step 8 Register for state and local taxes

Step 9 Obtain business licenses and permits

Step 10 Understand employer responsibilities

The above suggested steps by the SBA are only to “get you going”! Before opening your doors and capturing your first sale, there is the “last minute” type of checklist you need to examine to make sure you are “good-to-go”. In general, independent of the type of business you are planning, an illustrative listing (not necessarily all-inclusive) of the types of items you need to make sure you have considered is as follows:

1. Have you prepared a master plan and schedule that shows at least weekly for the next six months and monthly thereafter for the subsequent six months that shows all activities and tasks you need to perform to get your business going? Such activities would include staffing and hiring, marketing and advertising, and attendance at trade shows and industry-related events. You will need the schedule to track your activities and measure your performance. Consider your master plan and schedule an integral part of your time management system which is important when trying to get your new business venture started.

2. Do you have an agreement in place with your key family members where everybody agrees with what you are venturing into and everyone understands the risks and potential family stresses that might occur? You’ve got to have “buy in” so as to not jeopardize marital and other family relationships.

Referring to the SBA Step 4, do you have your business banking account opened and do you have a relationship (such as credit lines, loan agreements, etc. as applicable) with your banker to help you deal with any financial issues that may arise in the course of running your business? Keep in mind that most start-up businesses don’t generally show profits for at least 6-9 months and perhaps even longer. You should have a budget in place to account for this and your banker can provide guidance to you.

3. Have you made a list of all the key functions (such as human relations/personnel, advertising, financial operations, sales and marketing, employee training, etc.) that will need to be performed in the course of running your business and have you made assignments in the sense of who will be responsible for performing these functions? In the beginning, you may be the one that has this initial responsibility, but, as your business grows, you will need to delegate these functional responsibilities to others in your company.

4. Are your record keeping and accounting systems ready to go? Do you have an accountant who can help you with setting up your bookkeeping structure, tax planning strategy and payroll setup?

5. Referring to SBA Step 10, if you plan to hire employees, do you have a plan for preparation of an employee handbook that spells out all business rules and policies that are consistent with applicable labor laws and regulations?

6. Do you have legal service available to you if you need it? It would be prudent to have your attorney review all lease and rental agreements, as well as all other potential liability agreements and contracts, before you sign them.

7. Have you researched and do you understand all applicable laws and regulations that may pertain to the operation of your business? These would include at, a minimum, laws and regulations dealing with environmental issues (such as storage and use of hazardous materials) and workplace health and safety issues.

8. Have you identified all local, state and federal agencies that may have regulatory oversight regarding your business operations? You may have identified these agencies in your business plan (SBA Step 1), but once you commence business operation there may be reporting requirements and forms that you will need to fill out and submit on a periodic basis. Make sure you list these requirements in your master plan and schedule.

9. Have you given consideration to an Advisory Board to help guide you through the operation of your business? Having a “sounding board” of knowledgeable people to consult with as you go down the path of being an entrepreneur will help keep you on track and can give you guidance as to how to deal with important business issues as they arise. It could be a “lonely journey” without friends to talk to!

10. Have you met all of your business insurance requirements? If you are going to run a professional services company, you may need professional liability insurance. If you plan to manufacture and/or distribute products, you will probably need product liability insurance. If you hire employees, you will need Workers Compensation insurance. Depending on the size of your business in terms of number of employees, you may need to provide health insurance. You can expect to need business property insurance (fire and theft) and your landlord will want to be named as an additional insured. The point here is that you should have an insurance agent/advisor who can help you get all required coverage in place before you start your business. Remember, insurance costs need to be budgeted for in operating your business.

11. If you need office equipment (such as furniture, computers, copiers, telephones, etc.) and/or production equipment and related machinery and tools to operate your business, have you made all the necessary arrangements to make sure these essentials are in place when you open your doors?

12. Do you have sales and marketing brochures and literature completed along with scheduled advertising programs identified and ready to be implemented? Your marketing plan should have been presented in your business plan (SBA Step 1). Now is the time to implement it.

13. Have you done your “pricing homework”? If you are starting a services business, do you know what to charge for your services? If you are going to sell and/or distribute products, do you know what to charge for these products? Remember that pricing your products or services is one of the most important business decisions you will make. You must offer your products or services for a price your target market is willing to pay and one that produces a profit for your company; otherwise, you won’t be in business for long. You should have this information in place before you ever talk to a customer.

14. Could your business benefit from the use of social media such as Facebook, Twitter, etc.? If so, do you have a plan for doing so? If applicable, this should be an integral part of your marketing plan that you could probably start early in your start-up activities.

15. Do you plan to have a web site? If so, you will need to not only design it but also select your domain name. These are things you can do before you open your doors.

If your business involves manufacturing and/or distributing products, then there are some additional checklist type items that you need to consider such as:

1. Have you identified your vendors, suppliers and distributors that you will need and do you have agreements in place?

2. If you will need any special equipment and tooling to operate your business, have you placed orders and made arrangements to get these items delivered to you so as to not delay the start of business operations?

3. Do you have a system devised for tracking inventory and determining when to reorder?

4. Do you have quality control procedures and processes defined to be implemented when you start manufacturing and inspection operations? If you are going to be required to have ISO and/or UL type certification for your products, then investigating what is involved before opening your doors would be a prudent thing to do.

5. If you are either importing or exporting goods, do you know what is involved such as applicable U.S. Customs regulations and the use of Customs brokers if necessary? This is an example of the type of homework you could do before starting your business. There may be applications and registration type forms that you could get completed and submitted before opening your doors.

6. If you have any intellectual property such as patentable products, copyrights and trademarks that you would like to protect, than have you taken the necessary steps to do this? Registering copyrights and trademarks can be done in a relatively short period of time, but filing for utility patent protection can take 2-3 years before the patent is issued. Hence, why wait? Start this process as soon as possible.

Admittedly, all of the above checklist type items may not apply to your particular new business venture, but you should at least peruse them to make sure you haven’t forgotten anything. The key is to get as much of a running start as possible. Remember SCORE counselors can not only help you with the preparation of your business plan but also with the steps required to run a successful business.

Saturday, October 18, 2014

SCORE Orange County 3rd Annual Women Business Owners Conference

image This article was written by Michelle Russillo, SCORE Orange County Business Mentor

Business conferences tend to be a very important part of someone's training and development. There are conferences that are made exclusively for business women that will help train in the areas of business, networking, and leadership. This is why attending the SCORE OC's 3rd Annual Women Business Owner's Conference is something that many women are considering doing.

There are two primary reasons to attend this conference or one like it. It is to learn new skills and also to network with other business owners and future business leaders.

Of the many skills taught at this conference you are going to learn things like how to inspire and motivate clients, motivation techniques with current employees, how to attract the right talent into your group, consulting tips, what to do to get a website more visitors, tips on social media and search engine optimization, money and career management, and how to make a business even more profitable.

Each of these types of skills are taught by professionals like Gail Goodman, CEO of Constant Contact and Kim Shepherd, CEO of Decision Toolbox. These professionals have actually had success in their specific area of expertise. They will teach you what actually works in 2014 and tell you what you need to avoid. This type of information is invaluable especially to those who are still working hard to get the success they have always wanted.

These skills are taught in sessions and classes that are easy to digest with the harder principles broken down so that anyone can understand them. Being taught by those who have been in their shoes before makes it that much more exciting.

Besides the things that you learn, you also have the ability to network with others. This means meeting new people that can be friends, business partners, mentors, and others. This type of networking and support is something that is so easy to do at a conference that typically doesn't happen in day to day life. At times, the relationships formed are more valuable in the long run than the material presented. For those who have never attended a conference like this before, you will be amazed at how easily lasting relationships are formed at these types of events.

This 3rd annual conference is held on October 30th, 2014 from 7:30 -3:30 and Cocktail Reception to follow at the Newport Beach Marriott Hotel and Spa. It is primarily designed for women but men are able to attend as well. It is best to register early just in case it sells out. www.wboconference.com

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Editor’s Note: In the above photo, Dennis Wright (center) accepts the SCORE Chapter of the Year Award from Ken Yancey (left) CEO of the SCORE Association and Jerry Glenn (right) Chairman of the Board, SCORE Association. This is the fourth time Orange County SCORE has been honored with this award. No other SCORE chapter has won the award more than once. We owe this singular award to YOU, our valued clients. Your Business is our Success!!

Buying A Home Based Business Part 9: Investor Financing

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This article was written by Mike Capsuto, SCORE Orange County Business Mentor

Run your business idea up the flagpole and see if anyone salutes it. Unknown

Many purchases are financed through investors in exchange for partial ownership of the business. These investors range from friends and family to strategic investors. Each has advantages and disadvantages.

Information in this article is provided for general educational use only. No responsibility is assumed for any problems associated with the use of its content. One should seek the advice of their financial and legal counsel in every step of purchasing a business.

Friends & Family

Friends and family can be an essential source of funding. It is important that they understand how their investments works. Explain how you will use the money. Make it clear that you need an investment, not a board of directors. Be polite but firm. Sometimes people expect to have a say in how you run your business if they provide you money. This can strain your relationship.

Advantages:

• Investments sought from family may also be easier to acquire than that applied for from outside investors.

• The terms offered are likely to be considerably better than those of a professional investor.

• They already know and can trust you.

• They may be able to introduce you to some of their business associates and provide networking.

• The return they seek may also be lower.

Disadvantages:

• People expect to have a say in how you run your business if they provide you money. Make it clear that you need an investment, not a board of directors.

• Usually these arrangements tend to be made informally. Draw up all the documentation necessary to make it official. Involve your business lawyer to make sure everything is done legally with the terms of the agreement being completely understood by all parties.

• The amount that they will invest is low - $50,000 or less.

Angel Investors

Angel investors are high net-worth private individuals who invest in businesses looking for a higher return than found in traditional investments. Many are successful entrepreneurs who want to help other entrepreneurs get their business off the ground by providing their business knowledge along with their money. There are approximately 250,000 angel investors in the US who fund over 30,000 small companies each year. They often invest in groups with each taking a part ownership in the company.

Advantages:

• They invest their business knowledge and networking opportunities in addition to money.

• Relatively patient about their investments.

• Their investments range between $25,000 to $1 million - sufficient to help finance a business purchase.

Disadvantages:

• Difficult to find. Some sites are: www.commonangeles.com; www.savp.com; www.investorscircle.net.

• They often like to invest in groups. This can be hard for owner to manage the divergent interests of a large group of angel investors.

• Are very selective in their investments.

Venture Capitalists:

A venture capitalist is a professional investor. He or she manages a fund and is looking for suitable investments for that fund. They may have no business experience applicable to the targeted industry and are focused only on the potential rate of return on their investment your company can provide. Venture capitalists are attractive to new companies with limited operating history that are too small to raise investment capital or secure a loan. In exchange for the high risk assumed, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership and value.

Advantage:

• Typically they can provide additional capital if you need more to grow.

Disadvantages:

• Must be a fast growth business.

• Must be interested in selling the business or going public within three to five years for them to recoup their investment and profit.

• Must be prepared to share control.

Strategic Investors

These are Individuals or firms that seeks to invest in a business that complements their business strategic objectives by better enabling the products or services they sell.

Advantages:

• Because they are well known it enhances your credibility in the industry.

• They can provide immediate access to manufacturing, distribution, and marketing sources.

• They can provide your business with immediate contact opportunities.

Disadvantages:

• Can force you to modify your entire business to serve them.

• Dependency can be risky.

• Can prohibit you from selling to their competitors.

• They can cancel their business relationship with you on a moments notice.

Crowdfunding:

Crowdfunding allows businesses that are too small or risky to attract funding from financial institutions or investors, to seek funding through the internet. Under a proposal forwarded by the Securities and Exchange Commission (SEC) companies seeking to raise $100,000 or less than would need to provide financial statements and tax returns for the most current fiscal year. Companies seeking to raise more than $100,000 and up to $500,000 would have to provide financial statements reviewed by a CPA. Audited financial statements would need to be provided from companies seeking to raise more than $500,000. The maximum that can be raised in a 12 month period is $1 million.

Advantages:

• Streamlined fund raising process - Crowdfunding must be done through a registered broker-dealer or registered “funding portal.” The online process allows a company to have their website and all of their documents and information in one place, so it’s a one-stop shop for interested investors.

• Crowdfunding allows entrepreneurs to review all the investors who are interested in their company, and approve or deny their investment. The entrepreneur is still very much in control of their fundraising round, and this option helps c

Disadvantages:

• Competition - depending upon what you are providing, you may encounter much competition for funding from people in the same field as you.

• Funding Limitations - crowdfunding caps the amount a person can invest in all crowdfundings over a 12-month period at 10% of annual income or net worth of $100,000 or more or the greater of $2,000 or 5% of annual income or net worth of less than $100,000.

• Cost – the cost of producing the required documentation can be extensive.

• Uncertainty- the SEC proposed rules and regulations are out for public comment. They can change in the near future.

Bottom line: Be sure you know what you’re getting yourself into when seeking investors.

A One-Week Listening Leadership Challenge

This article was written by John C. Maxwell, in Success Magazine, October 2014, reprinted by permission

In a TED Talk I viewed recently, economic development expert Ernesto Sirolli told the story of working to develop sustainable agriculture in Africa for six years during the 1970s. Sirolli said his first project seemed simple enough: Plant a garden and teach the local Zambians how to grow tomatoes and zucchini.

Initially they made great progress. Sirolli and his team were amazed by how easy it was to grow food in Africa. After months of hard work, the garden burst with tomatoes.

Then one evening close to harvest time, Sirolli watched helplessly as some 200 hippopotamuses marched out of the river and ate everything.

“We said to the Zambians, ‘My God, the hippos!’” Sirolli recounted, “and the Zambians said, ‘Yes, that is why we have no agriculture here.’
“‘Why didn’t you tell us?’
“‘You never asked.’”

Sirolli and his team had a solid plan and good intentions, but without that one incredibly important piece of information about the hippos, their work in the garden was wasted. Through this experience, Sirolli learned the importance of listening first and acting second. I love his story because it illustrates a great truth that we can all learn: If you don’t ask the right questions, you won’t get the right answers.

I’ve had to work hard to become a good listener. My impatient nature can make it difficult to stop and open my ears. Leaders tend to have a bias toward action, but over the years I have learned the value of listening with more intentionality. As a result, both my team and I have enjoyed better results.

Is it possible to be a leader without being a listener? Sure. I talk to employees all across the country who tell me they work for people who don’t listen to them. But is it possible to be a good leader without listening? No. Leaders cannot take their organizations to the highest levels without making the most of messages they hear from their people.

“A leader has to show curiosity,” former Chrysler Chairman Lee Iacocca once said. “He has to listen to people outside the ‘Yes, sir’ crowd in his inner circle.... The inability to listen is a form of arrogance. It means either you think you already know it all, or you just don’t care.”

Take the following week-long challenge to improve your leadership listening.

The Listening Audit

The first step is to take an honest look at your current approach to communication. Start by asking yourself the following questions:

1. Am I open to other people’s ideas?

2. Am I open to changing my opinion based on new information?

3. Am I actively seeking feedback and input in order to move the team forward?

4. Do I act defensively when criticized, or do I listen openly for the truth?

5. Do I ask questions in every conversation?

At the end of each day, reflect on the day’s interactions—every meeting, conference call, phone conversation and so on—and calculate the percentage of the time that you spent listening as opposed to the time you spent speaking. How much of the day were you actively taking in information? At the end of the week, tally up your percentages and get an average. Set a goal to increase your listening percentage in the upcoming week. Be sure to track your progress.

What you are trying to develop are these five strengths of a listening leader:

Connecting. In my book The 21 Irrefutable Laws of Leadership, I write about the Law of Connection, which states, “Leaders touch a heart before they ask for a hand.” You cannot connect with other people when you are the one doing all the talking! Do this intentionally. Stop, make eye contact and be fully present, and you’ll find yourself truly connecting—not half-listening.

Building confidence. Take time to listen to each person on your team. New people, in particular, offer a fresh perspective that can lead to valuable insights, but they may not feel they have the right to contribute their thoughts. Shake their insecurity by soliciting their ideas and taking those suggestions to heart. Henry David Thoreau once said, “The greatest compliment that was ever paid me was when someone asked me what I thought and attended to my answer.” Don’t you feel the same way?

Soliciting ideas. Great leaders create an environment of innovation. That requires actively seeking out new ideas. I often find that listening precedes great periods of creativity in an organization. In the words of Richard Branson, “Any organization’s best assets are its people, and if you are ready to help the team to achieve its goals, you can start gathering information on how to move things along just by paying attention to what employees are saying.”

Taking action. With your new focus on intentional listening, you will probably find that you have an abundance of good ideas at your fingertips. Just hearing them isn’t enough. Good ideas have expiration dates. You need to act before they become dated, irrelevant or otherwise spoiled. A bonus: Members of your team will see your responsiveness, feel valued, trust you with their ideas and keep bringing them forward.

Reflecting nightly. Maximize your new habits by taking time before bed to think and reflect so you can process and apply what you have learned.

Do you want to increase your leadership capacity? Work on applying these practices on a consistent basis. Pastor and speaker Robert Schuller once said, “Big egos have little ears.”

I challenge you to become the opposite—a small ego with big ears. Because that’s the kind of person who truly excels.

Are you giving your employees the permission to speak freely? Find out how to inspire healthy boundaries on your team.

Thursday, September 25, 2014

Hiring A Salesperson

image This article was written by Barry McKinley, SCORE Orange County Business Mentor

Hiring a new employee is always a gamble. Effective interviewing will decease tremendously the chance of a bad hire. Too many business owners or managers hire the first or second person they interview. I wonder if they also got married after meeting their spouse for a half hour. I would be willing to bet NO. So why do they hire so quickly? The best answers are; they probably don’t enjoy interviewing, know how to do it, and hate to waste the time. Remember, with any new hire you are giving them the keys to your business. They can upset customers and fellow employees, they can steal from you, they can waste time (again stealing), and they can hurt your business for years after you terminate them. The average new hire costs you 2-3 times their annual earning when you factor in hiring costs, training, ramp-up time and weak hires.

I am a firm believer that you should look at a number of qualified applicants for a job opening. You may want to run ads in a few different locations. By doing this you will get different degrees of qualified applicants. Once you have done this you hopefully have a stack of resumes. Now you need sort into three piles, (1) Qualified, (2) Maybe, (3) I hope my competitor hires them.

You may want to take stack one and prequalify by phoning them and question them on their resume claims and get a better feel if this is the type of employee that would fit in your company. This also becomes an effective way to weed out those applicants lying or exaggerating on their resume.

Now you have whittled your stack down more, have the remaining potential hires email to you, ‘Why they feel they have what it takes’, ‘What are their outstanding skills.’, ‘Why should you schedule a face to face interview with them.’ If they are not able or willing to do this on a very timely basis, drop them and move on. Remember you are hiring a salesperson and this request will be made daily to them by your customers. You want to find out how creative this applicant can be.

Once again your pile is shrinking, now is the time to schedule your first face to face interview with them. Also request that they come prepared to make a sales presentation on either your company or what they have been selling in the past. Do not except excuses for being unprepared, your customers won’t, why should you? Keep in mind they are salespeople and may be very creative with alibis.

The successful candidates should be brought back in for their second interview. This time you may want to also consider bringing in other management or team players. This is critical as you now have other eyes looking at the candidate and from a different point of view.

The final step is going to be doing a COMPLETE reference check and background check. The cost to do this is nothing compared to what a bad hire may cost.

Before making this person a full time employee if possible have them work with one of your top salespeople for a few days on a trial basis. Problems may be detected that weren’t found previously.

Now that you are satisfied, you have selected the top candidate and they have “no skeletons in the closet”, you can make them a job offer. Be sure that it is in writing and you review each point with them and finally have the candidate sign an acceptance.

Keep in mind that the average “new sales hire” takes 8-10 months to start paying their own way. This time can be shortened by constant training, role playing, product and account review and management support. As always “Time is money”!

Learn to interview like a top pro! Attend our SCORE Workshop, “Hiring Made Easy”.

CSUF Student-led Business Consulting Success Story

image This article was written by William Dyer, Vice President and Founder, HCP National.

(Editor’s Note: SCORE Orange County is not affiliated with HCP National, but has actively mentored participants in the CSUF Student-led Business Consulting Program for many years. If you are considering engaging consultative services, we recommend that you check into this program. We’re confident that you will be pleased with the results.)

Several years ago we engaged with the CSUF Student-led Business Consulting Program led by Professor John Bradley Jackson for advisement on our marketing. We wanted new ideas for our insurance brokerage, which specializes in health care, with an emphasis in Medical Malpractice.

The CSUF Student-led Business Consulting group that we hired came up with a very impressive marketing plan; there were several great ideas that we implemented. One of them involved our client retention program, which allowed us to graphically show how much our clients have saved from working with our company over the years. This has been a valuable tool to remind some of our clients the value of a long term relationship with our firm.

This year, we challenged the students to improve our online marketing to target physicians. Doctors are incredibly busy and very hard to reach. We have insurance programs for Medical Malpractice that can save doctors thousands of dollars and we need to get that word out. The students we are working with now have contributed some good ideas; we are expecting to implement our online marketing plan shortly.

We find that young minds come up with ideas that older minds would think of as impossible. Also, we want to help students that want practical, hands-on experience. A college education is very valuable, but getting hands-on experience and applying what you have learned is gold.

Buying A Home Based Business Part 8: Financing Your Purchase – Debt Financing

imageThis article was written by Mike Capsuto, SCORE Orange County Business Mentor

A bank is a place that will lend you money if you can prove that you don't need it. - Bob Hope

Information in this article is provided for general educational use only. No responsibility is assumed for any problems associated with the use of its content. One should seek the advice of their financial and legal counsel in every step of purchasing a business.

Most small businesses are funded through financial institutions. They provide loans or lines of credit that come with a repayment schedule. The starting point is a well prepared business plan. Business plans let lenders determine whether a business is likely to succeed based on information provided. They will review the prospective company’s cash flow, collateral, asset liquidity, financial statements and projections.

In addition to the business plan, creditors may evaluate the applicant by using what is known as the 5c's of credit. This method of evaluating a borrower incorporates both qualitative and quantitative measures to ascertain the chance of default. The 5c's are:

1. Character refers to a borrower's reputation.

2. Capacity measures the ability to repay a loan by comparing income against recurring debts.

3. Capital any assets the borrower puts toward a potential investment. A large contribution means the buyer is assuming more of the risk and will lessen the chance of default to the investors and creditors..

4. Collateral such as property or large assets pledged for the payment of a loan in case of default.

5. Conditions the terms of the loan, such as the interest rate and amount of principal and the state of the economy that will influence the lender's desire to finance the borrower.

Financial Institutions

Financial institutions are hesitant to provide loans to small businesses because of a history of high default rates. The SBA reduces the risk by guaranteeing the loan.

The 7(a) Loan Program is SBA’s primary program for helping start-up and existing small businesses. Proceeds may be used to establish a new business or to assist in the operation, acquisition or expansion of an existing business. When a business applies for an SBA loan, it is actually applying for a commercial loan which are then made by its partners (lenders, community development organizations, and micro-lending institutions), structured according to SBA requirements. The requirements of eligibility are based on prospects of the business, not the owners.

Advantages:

• Don’t have to give up part of the business to obtain funding

• Available to companies that can’t get funding from other sources.

Disadvantages

• Loan maturities are based on the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed.

• Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.

• They provide limited networking or mentoring opportunities.

• May require personal collateral such as home.

SBA loan guaranty requirements and practices can change as the Government alters its fiscal policy and priorities to meet current economic conditions. Check their website www.SBA.gov for general information on loan programs.

Grants

There is a persistent belief that some entity of the federal and state government is out there handing out free money for people who want to start small businesses. Nothing could be further from the truth. Moreover, as it relates to financing, the government does not care what race, ethnicity, or gender you are. Grants to start a “for profit” business are virtually non-existent. Grants, when available, are usually awarded to non-profit businesses or companies involved in specific businesses that the government wants to encourage. These would include such things as renewable energy, education for at-risk youth, etc. There are also special program for groups such as veterans, disabled persons, and so forth.

For qualified persons, federal, state and local governments offer a wide range of financing programs to help small businesses start and grow their operations. Government grants are funded by tax dollars and, therefore, require very stringent compliance and reporting requirements to ensure the money is spent in accordance to the grant provisions.

Advantages:

• They can provide large monetary awards with just one proposal.

• Most grants do not have to be paid back.

• Those who receive government grants may find it easier to raise money from other government and private sources.

• Grants can be prestigious and give a business instant credibility and public exposure.

Disadvantages

• Preparing government grant proposals require research and planning and are not easy to write.

• Government grants come with requirements to spend the funds according to a complex set of regulations and laws.

• Government grants are highly competitive - many organizations are going after the same funds.

Seller Financing

Seller financing is the process by which a person who is selling a business extends credit to the person buying it, using the business as collateral. The buyer makes a down payment and installment payments until the loan is fully repaid. For sellers such an arrangement can aid the sale of their business if the buyer has difficulty obtaining a loan. For the buyer, seeing that an owner is willing to finance the sale of a business can indicate that they are confident of the business's ongoing profitability.

Advantages:

• Both the buyer and the seller can saves in fees that are connected with bank, home equity or refinancing loans.

• The buyer can negotiate interest rate, repayment schedule, and other conditions of the loan.

• The buyer can request special conditions for the purchase, such as inclusion of equipment.

• The buyer does not have to qualify with a loan underwriter.

Disadvantages

• The buyer could pay the loan in full but still not receive legal rights due to other encumbrances not divulged by, or unknown to the seller.

• The buyer could make payments faithfully, but the seller might not make payments on any debts that may be in place, thus subjecting the business to foreclosure.

• The buyer might not have the protection of an appraisal to ensure that the business is not over priced.

• The seller could choose which collateral to best secure their interest until the loan is paid.

In order to protect both the buyer's and seller's interests, a legally binding purchase agreement should be drawn up with the assistance of an attorney and then signed by both parties.

Friends & Family

Family and friends may provide a loan depending on your reputation with them. This method of financing typically comes without much legal expense,

Advantage:

• Convenient.

• Fewest contractual requirements.

• Available quickly.

Disadvantage:

• Limited one-time source of funding generally less than $50,000.

• Maintaining your relationships with friends and family especially if you lose their money.

• Unless properly structured in writing, there may be controversy as to how the money was obtained. Was it as a gift, a loan or an investment?

Micro-Loans

Micro-loans are available through certain nonprofit, community-based organizations that are experienced in lending and providing management assistance to small business. Micro loans are generally available to people who have been rejected for loans due to lack of collateral, steady employment and a verifiable credit history.

Advantages:

• There are fewer requirements for applying for a micro-loan, making it easier to secure one.

• Micro-loan lenders help mentor businesses.

• Micro-loans are easier to pay off.

The Disadvantages of Micro-Loans:

• Micro loans have high interest rates but lower than credit cards.

• Many applicants for the limited funds.

• The amount loan is limited to usually less than $50,000 and may not be sufficient to purchase a larger business.

• At least two years of demonstrated experience in the specific industry of your business.

• Positive cash flow sufficient to pay the loan.

• Good credit history or an acceptable explanation of negative marks.

• Collateral or a co-signer to cover the amount of the loan.

• A realistic business plan with projections acceptable to the lender.

• A reasonable expectation that the micro-loan will not be used for living expenses.

For more information go to the SBA website, SBA.gov, which has a list of micro-loan intermediaries

Unsecured Business Loans

Unsecured business loans also called Signature loans. The lender only takes the borrower’s word for it. Generally no collateral is required. The borrower signs a promissory note stating the terms and conditions, that the loan will be paid back usually no longer than 2 years.

Advantages:

• Application approval time is within 48 Hours.

• Funding is 3 to 5 days.

• Credit requirements are lax.

• No collateral is required.

Disadvantages:

• Personal guaranty required.

• The lender will also want a co-maker or guarantor to sign the note pledging to pay the loan in the event default.

• The lender takes higher risk compared to secured loans so the interest rate tends to be higher.

• Loans that end up in default go through an aggressive collections process that can double the outstanding balance and harm a borrower’s credit history.

However, people who do not have any collateral to pledge or cannot obtain a loan from other sources may find an unsecured loan appealing.

Why the Market Analysis Section of Your Business Plan is the Most Important Element of Your Plan

image This article was written by John Rau, SCORE Orange County Business Mentor

Most business plan templates suggest the following topics to be addressed in your business plan: executive summary, company overview, description of the products and/or services that you intend to provide, a detailed market and industry analysis (including a competitive assessment), a marketing plan, your plan for business operation, your organization and staffing plan including qualifications of key personnel, your financial projections, and planned exit strategy. I contend that the key element of your business plan is your market analysis. If there is no solid market case for your business idea, then you don’t have a business idea worth pursuing and, as a result, don’t need to prepare a business plan! This is where you should start. Don’t worry about the other sections of your business plan until you have completed this analysis.

I have seen many business plans where the market analysis section has a discussion that states that “the market for the widgets that this start-up company plans to address is on the order of $100 billion per year” without any indication as to what portion of the widget market this business is trying to address! In other words, where is your niche and how big is it? You can be assured that, if indeed the market for widgets that you plan to produce is this large, there are already many companies already fighting over this market. In their best selling book entitled Blue Ocean Strategy published by the Harvard Business School Press in 2005, W. Chan Kim and Renee Mauborgne define the business universe as consisting of two distinct kinds of space referred to as red and blue oceans. According to them, “red oceans” represent all the industries in existence today. As they point out in their book, “in red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of the existing demand. As the space gets more and more crowded, prospects for profits and growth are reduced. Products turn into commodities, and increasing competition turns the water bloody”.

On the other hand, according to Kim and Mauborgne, “Blue oceans denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid.” When you’re in the blue ocean, you are in potentially uncharted territory. Your market “niche” may not necessarily be totally understood and/or well defined. You’re not sure who the potential competitors may be and how these entities might react to the introduction of your new business idea. It is, however, a great opportunity for “first to market entry”.

When preparing the market and industry analysis section of your business plan, you need to determine where you are with your business idea—specifically which ocean you are trying to navigate as this will shape your marketing strategy as well as your overall marketing plan to be discussed elsewhere in your business plan. If you believe you’re in the blue ocean when in reality you’re in the red ocean, then you’re in for a real surprise! That’s why market research is so critical in your business planning and development process. You need to know the “color of the water” you are trying to navigate and what you need to do in order to be successful as there is a different set of challenges in each ocean.

So how do you determine where you are? Here are some basic steps you should follow to assist you in making this determination:

Step 1: Define what you believe to be the market area that you are addressing in your business pursuit. Types of information you will need to present include the following:

  • Facts about your industry such as how it’s organized and sales trends, products and services involved, growth history, etc.
  • Total size of the market you are addressing within this industry sector—in particular, specifically define the market niche you are addressing
    • If it’s a niche currently ignored by competitors or ill-served by competitors, then you may be in the Blue Ocean.
  • Description of your target market or focus area along with an assessment of the growth history and current demand.
  • Description of any barriers to entry in your target market and, if there are any, how do these apply to you and what steps do you need to take to overcome these.
  • Description of your potential customers such as consumers, businesses or both
    • For consumer customers, provide demographics such as age, gender, location, income level, social class/occupation, education, etc.
    • For business customers, demographics would include industry or segment of an industry, location, size of firm, demand for products and/or services you plan to provide, etc.

Step 2: Define the competition in your market area. You should never assume that you have no competition for your product or service just because you were unable to identify any direct competitors as there will always be companies that have the capability to move into your market area if they see a significant market for themselves. Here you need to present the following types of information:

  • Describe the competitive environment in your industry and market area in terms of the names of such companies, a description of what they provide that makes them competitive, annual sales and pricing information, estimates of their market share, etc.
    • If your target market area is dominated by a few companies that control a major share of the market, then you’re in the Red Ocean and should not consider competing directly with them.
  • An assessment of the nature of the competition in terms of do these companies compete with you across the board, just for certain products, certain customers or in certain locations.
  • A comparative assessment of your business idea (product and/or service) as it relates to your competitors—specifically what is different and/or better about what you are offering, that is, your potential discriminators.
    • You need to provide the reasons as to why customers who may already be buying/using your competitors’ products or services might switch to yours.

Step 3: Based on what you learned in Steps 1 and 2, conduct an assessment of where you fit in the “big picture”. According to Stephen Lawrence and Frank Moyes at the Deming Center for Entrepreneurship at the University of Colorado at Boulder (see Writing a Successful Business Plan, 2004), your Market and Industry Analysis section of your business plan should conclude with a summary of what the opportunity is and why it is attractive. Remember that this is a key section of your business plan because here is where you must make the case that there is an attractive opportunity for your venture. They suggest that you address the following key points in your summary:

  • What is the size of the opportunity? How rapidly is it growing? What trends support the opportunity?
  • What is the compelling need? What problem(s) are you solving?
  • What evidence do you have that proves there is a market?
  • Who is the target market?
  • What is unique about your product or service? What are the benefits?
  • What is your competitive advantage?

Remember, it’s not enough to say “there is a big market for your product or service”. You need to back it up with facts!

Saturday, August 9, 2014

Buying A Home Based Business Part 7: Financing Your Purchase – Self Funding

image This article was written by Mike Capsuto, SCORE Orange County Business Mentor

If you can count your money, you don’t have a billion dollars. J. Paul Getty

Home businesses vary in size and scope, making financing needs different. Some home businesses may only require a few thousand of dollars to start. Others may require investments of $100,000 or more.

Information in this article is provided for general educational use only. No responsibility is assumed for any problems associated with the use of its content. One should seek the advice of their financial and legal counsel in every step of purchasing a business.

Self Funding

Self funding sometimes called “bootstrapping” is using resources under your own control to finance a business without having to use outside sources for funding. It basically says you are willing to take the risk. If you don’t have cash readily available, you may consider selling an asset such a stamp or coin collection and using those funds towards your business.

Advantages:

• Owner has not diluted ownership by having investors wanting a payback.

Disadvantages:

• Substantial personal risk.

• Tight personal living expense budget.

• Loss of your personal financial safety net.

Other sources of self funding are:

Credit cards

Credit cards should be a last resort because of the unpredictability in using them to finance a business. The interest rates are high, credit limits can be reduced without warning, and there are fees if you use a credit card for a cash advance. However, a large percentage of small businesses use credit cards to finance their business in some way.

Advantages:

• Quick cash.

Disadvantage:

• High double digit interest rates.

• Minimum repayment schedule.

• It is a personal loan not subject to the protection of the business LLC or corporate structure.

Retirement Plans

Many buyers have built up sizable amounts in their 401(k) plan. There two basic ways to obtain money from your 401(k) – the money can be obtained either by withdrawing funds or may be borrowed as a loan. If the money is withdrawn, it is subject to state and Federal income taxes. 401(k) loans are both penalty free and tax deferred, provided that a loan remains in good standing. While early withdrawals cannot be later totally replaced, the paying back of 401(k) loans can effectively replenish your account.

Advantages:

• Minimal paperwork is required.

• No credit check as it is your own money.

Disadvantages:

• If you declare bankruptcy, your retirement plan assets are protected from creditors. If you withdraw money from your 401(k) to buy a business, that withdrawal is no longer protected.

• The maximum term for 401(k) loans is five years and repayment schedules usually start immediately after a loan is taken out.

• If you quit your job, your entire 401(k) loan balance is due within 60 days. If you can't repay it, the money is treated as a withdrawal. You will owe all Federal and state income taxes on it, plus an additional 10% penalty tax if you are under the age of 59.5 years old. You could be left with 50¢ to 60¢ on the dollar after taxes.

• Some 401(K) plans prohibit loans or early withdrawals except for certain situations. Consult with your plan administrator for the plan's terms and conditions.

Life Insurance Policies

Term life insurance policies typically do not have a cash value. If you have a Whole Life or Universal Life policy that has cash value built up in it, you can choose to surrender your policy and cash it out. Once that is done, you will no longer have life insurance coverage. If you want to take the cash out of your policy and keep your life insurance policy intact, you can borrow from the cash value or do a partial surrender. It's also important to keep in mind any tax ramifications that cause your surrender to become a taxable event.

Advantages of Taking a Loan Instead of Cashing Out:

• You can take out a loan against the cash value.

• A loan against your life insurance policy can almost be granted for any reason, without a credit check.

• The interest rate is usually lower than a traditional loan.

• A loan does not have to be paid back. You can pay back the loan on your own terms, but will not incur a penalty if you decide not to make repayments, however interest may continue to be charged.

• If the loan is fully paid back, the policy is in effect at the original value in the event of death.

• Disadvantages:

• If the loan is not paid back, the death benefit will be reduced by the amount borrowed, plus accrued interest if any.

Cash Out Advantages:

• You can cash out your policy and use the proceeds to fund the purchase.

• Survivors do not have to pay back after your death.

Disadvantages:

• A portion of the cashed out value may be considered taxable income.

• Surrendering the policy relinquishes the right to the death-benefit protection afforded by the insurance.

• It might be difficult and more expensive to get the same coverage at a later date.

• If the policy is surrendered during the early years of ownership, fees may be charged by the company, reducing your cash value. These charges vary depending on how long you've had the policy.

Please contact your insurance agent or financial adviser to assist you with that decision.

Bottom line: Whether you decide to invest 100% of your own money, seek funding from outside sources, or do both, make sure you review all the options available to you before making a decision.

Selling Steps To Success

image This article was written by Barry McKinley, SCORE Orange County Business Mentor

Selling is no different than building a house. First you start with a blueprint of what the house is going to look like when it’s finished. Then you form the basic foundation and you build from there. Without planning and creating the proper groundwork, your house will collapse. Smart salespeople understand that closing sales is done a step at a time. Skip one step and you have a breakdown in the process. Following are the 9 steps of successful sales closing;

 

 

1. Prospecting

Potential clients can be everywhere. Always be on the lookout, use social media, referrals, buying lists, competitor’s web sites, trade shows, goggle searches and 100 more ways. Constantly work to grow your list.

2. Qualify Client

Learn to determine who is a possible client and qualify their need, want, and ability to buy. We all want a new Ferrari but very few have the ability to buy. Do not re-qualify a client because of dress, education, race, etc. Never assume a client is NOT interested or can’t afford what you have to offer.

3. Appointment

Once you have found qualified clients you then want to establish a convenient time to make your presentation. Establishing an appointment time is not the phase when you present or try to sell the product. You are ONLY selling the appointment. Let the client know you will answer all their questions and concerns at the meeting.

4. Probing

This is the sales step that is most often neglected or breezed over. To make an effective sales presentation you must understand the client’s needs, wants and hot buttons. How is the buying decision made? Is the person you are talking to the decision maker? Without successful probing you are shooting in the dark.

5. Presentation

It’s show time! Follow a basic format; Introduction, Body, Conclusion, Close. You are always better ending five minutes early then going two minutes over. Keep your presentation interesting, relevant to the customer’s needs, simple to understand. Good eye contact and if possible demonstrations are important. Always sell the benefits not the features.

6. Objections

In any sales presentation you can expect to get objections. The first objection that the client raises may not be the true objection. Follow these simple rules: acknowledge the objection, explore and probe the objection, isolate the objection, answer the objection, move back to trial close.

7. Closing

In over 60% of selling situations the salesperson does not ask for the order after making the presentation. This is a critical error. You must ask a closing question, and wait for the client to answer. One of two things will happen: The client will either agree to buy, or he will raise an additional objection. If he does the latter, deal with the objection in the manner described above, and close again. In closing you want to build creditably, have the client see themselves with the product or service, point out the advantages, create a sense of urgency, and hit the client’s hot buttons.

8. Follow-Up

Successful sales people always contact the client to insure that they have received the product, understand it, and are happy with the results. Too many companies think the sale ends when you ship the product to the customer. This is the most critical part of the sale, insuring complete customer satisfaction.

9. Referrals

The life blood of any company is getting new customers. Most companies recognize that they will lose anywhere from 10-30% of their customers yearly. So, new business is critical for growth and success. Referrals are the best way to grow your business because these come from a “Satisfied Customer” telling a potential customer about your company. All the TV advertising cannot be as effective as word-of-mouth. Reward your referrals with discounts, dinners, trips or whatever.

To learn more of how to be an effective salesperson check the SCORE Workshop schedule on “Secrets of Selling” and attend the 3 hour workshop. There’s a good chance your competitors are.

“The Best Advice You’ll Ever Get”

From the July 2014 issue of Entrepreneur , reprinted by permission

Being an entrepreneur doesn't mean you have to go it alone. Most successful business owners will tell you they could not have accomplished their goals without help--from a mentor, colleague, even mom and dad. For many, their ability to evaluate, internalize and act on the counsel they received was instrumental in getting their companies off the ground.

In an effort to tap some of this wisdom, we called on business gurus to tell us the very best piece of advice they've received. From hiring to philanthropy and more, their responses were as varied as the companies they run.

Dennis Crowley, CEO, Foursquare

“Do what you love, and the rest will come."

After co-founding two businesses, reportedly turning down a $125 million acquisition offer and being named to just about every "40 under 40" list imaginable, Dennis Crowley, CEO of Foursquare, still cites the advice his mother gave him repeatedly as a child: to follow his heart.

This was the mantra he adhered to when he decided to get his master's degree at NYU's Interactive Telecommunications Program instead of going for an MBA. It was also behind his launch of social networking companies Dodgeball (which he sold to Google in 2005) and Foursquare, and his decision this past May to launch Swarm, an app that will unbundle the check-ins and other social media functions from Foursquare. (Foursquare will focus on helping users discover restaurants and other venues.)

"When I look back at my career to this point, I've spent the last 10 to 15 years following the same narrative, building things that people want to use and want to tell their friends about," he says, adding that he decided to spin off Swarm because, "over time, we realized that if we were passionate about these use cases, we needed to unbundle Foursquare into two apps."

He often thinks back to his mom's advice. "All of these [concepts] started as me working in my apartment building on something I thought would be cool," he says. "All are projects that turned into products that turned into companies."

Crowley has plenty of wisdom of his own to offer. Over the past five years, Foursquare has raised more than $140 million, enabling him to see the funding equation with fresh eyes.

"If someone funded your company, they funded your ideas and vision; your job is to turn that capital into the thing that's in your head," he explains. "There are a thousand lessons that we've learned from Foursquare, and perhaps the most important of those is to be clear to investors about what the company will do and will not do, and be open about the priorities of the things that have to get done."

After hiring hundreds of employees, Crowley also has gathered experience on building a reliable team. He likens the recruitment process to collecting art, arguing that leaders must take the time to hire strategically and "curate the team to make sure the people who are great stay, and the people who aren't as good get the help they need to become great."

But most important is to stick to your vision. "Don't let other people tell you that your ideas are bad," he says.

"If you throw away ideas when they exist only on a whiteboard, you miss the point a lot of the time."

Rick Alden, founder, Skullcandy

"The fastest route to revenue wins."

The way Rick Alden sees it, coming up with ideas is never a problem for a creative team. Instead, he says, the challenge is learning to say no to nine great ideas to free up the resources necessary to push one product to market immediately.

"That one product may not be your fantasy, but revenue on a simpler product today always beats running out of money developing a more complicated product that won't launch for another year," he says.

The founder of several snowboard companies, Alden collected this advice from Guy Kawasaki's The Art of the Start, a book he says crystallized many of his long-held observations about how startups work. "An entrepreneur's life is entirely dictated by the questions How much? How fast? and At what margin?" Alden says. "Everything else is secondary."

Peter Relan, founder, 9+

"It's all about the sailor."

An investor in Peter Relan's first incubator, YouWeb--which spawned CrowdStar, OpenFeint and other gaming and mobile companies--once told him that no matter how great an idea is, success in business is more about the sailor than the boat. The way Relan sees it, this advice has proved true time and again.

"A great entrepreneur can take a bad idea and turn it into something incredible," says Relan, who now helms the tech incubator 9+. "This means that while ideas are important, it's even more critical to have the right people in the right positions to execute them."

Sheila Johnson, founder and CEO, Salamander Hotels & Resorts

"Surround yourself with a great team, and build that team slowly."

Sheila Johnson certainly knows a lot about teams. She is owner or partner in three professional sports franchises: Washington, D.C.'s Capitals, Wizards and Mystics. She was also founding partner of the BET network and built Salamander, a manager of luxury resorts, from the ground up. "Your team is one of your most important investments," she maintains, "and if you are careful about hiring only the best people, it will pay dividends."

Melinda Emerson, founder and CEO, Quintessence Group

"Always know your next hire."

There are countless risks associated with being a small-business owner, and one of the biggest is staffing. "Nobody is going to love your business as much as you do, so you have to protect it," says Melinda Emerson, who proffers advice of her own under the moniker SmallBizLady. She credits this wisdom to a mentor, Wanda Alexander, who warned her that people will quit with no notice on the worst day possible--so long as it's advantageous for them. Emerson's advice? "Keep in touch with people you didn't hire but you really liked; you never know when you might need to call upon them to help you out."

Jim Murren, chairman and CEO, MGM Resorts International

"Spend most of your time looking forward."

In the casino industry, where fortunes change literally overnight, reflecting on the past does little good, aside from providing context for future decisions. MGM Resorts International founder Kirk Kerkorian championed the "only look forward" approach to business, and Jim Murren, who recently oversaw the $8.5 billion development of CityCenter in Las Vegas, carries the torch. He wants the people at his company to have the capacity to envision the long term. "Creating teams that have an understanding of not only what they are doing but, most important, why they are doing it, is critical," he says.

Christine Day, CEO, Luvo

"If you wait for evidence, you'll be a follower, not a leader."

Christine Day considers herself a doer--it's what drove her to develop Vancouver, British Columbia-based lululemon athletica into an international juggernaut before she left to lead healthful-lifestyle food brand Luvo in early 2014. Earlier in her career, while heading up the Asia-Pacific division at Starbucks, she heard CEO Howard Schultz explain why he does not rely on market research for innovation. It changed her perspective forever.

"There is no evidence for what has not been created yet; only insight, purpose, passion and a willingness to move into what could be instead of what is," she says. "Truly innovative companies are not afraid to let go and create the next market shift."

Diane Bryant, senior vice president and GM, Data Center Group, Intel

"There is value in expanding and rounding out your expertise and skill set."

Just because you've been around the block doesn't mean you can't grow as a professional. This is the gist of the advice former Intel CEO Paul Otellini gave to Diane Bryant when she served as chief information officer earlier in her career.

"The better you understand your customer, the higher the probability of success," she says. "As CIO, I was tasked with translating Intel's products and technologies into business and productivity benefits--top-line and bottom-line results for the corporation. Now I know firsthand what works and what doesn't."

Rehan Choudhry, founder, Life is Beautiful

"Stop being scared, and jump."

It took Rehan Choudhry years to get the courage to leave his hospitality-industry job to start Life is Beautiful, a Las Vegas-based festival that features music, food, learning and art. This advice from a mentor provided the final push he needed.

"What makes an entrepreneur is not knowing everything about business, but rather being passionate and fearless," Choudhry says. "There's no 'right time' to take the leap; you can take it at any point in your life, and should."

He says this perspective has prevented him from overthinking every decision or opportunity that comes his way, leaving him more focused and nimble.

Reece Pacheco, founder, Shelby.tv

"Be human."

It's easy to focus on transactions, especially when you're struggling to start a company. But this is when it's most important to remember that your customers are people, too. "Take a second to recognize that there is a person on the other side of you," says Reece Pacheco, who was given the advice early in his career from a branding expert. "It can make all the difference in the world." Pacheco adds that the mantra applies to every aspect of life as an entrepreneur, from the way you treat colleagues to the way you interact with investors.

Nick Lazaris, president and CEO, Coravin

"Trust yourself."

Issues You Need to Consider in Starting Your Business and Why Having a Checklist is Important as You Move Forward

image This article was written by John Rau, SCORE Orange County Business Mentor

There are dozens of sites on the Web that have checklists that remind you of the many tasks you should perform before you open the doors to your business. The real importance of these checklists is to help you remember a lot of important steps that you might otherwise overlook. For example, the U.S. Small Business Administration (SBA) has provided a listing of the “10 Steps to Starting a Business” (see http://www.sba.gov/content/follow-these-steps-starting -business) which is summarized as follows:

 

 

  • Step 1 Write a business plan
  • Step 2 Get business assistance and training
  • Step 3 Choose a business location
  • Step 4 Finance your business
  • Step 5 Determine the legal structure of your business
  • Step 6 Register a business name such as “Doing Business As”
  • Step 7 Get a tax identification number
  • Step 8 Register for state and local taxes
  • Step 9 Obtain business licenses and permits
  • Step 10 Understand employer responsibilities

The above suggested steps by the SBA are only to “get you going”! Before opening your doors and capturing your first sale, there is the “last minute” type of checklist you need to examine to make sure you are “good-to-go”. In general, independent of the type of business you are planning, an illustrative listing (not necessarily all-inclusive) of the types of items you need to make sure you have considered is as follows:

1. Have you prepared a master plan and schedule that shows at least weekly for the next six months and monthly thereafter for the subsequent six months that shows all activities and tasks you need to perform to get your business going? Such activities would include staffing and hiring, marketing and advertising, and attendance at trade shows and industry-related events. You will need the schedule to track your activities and measure your performance. Consider your master plan and schedule an integral part of your time management system which is important when trying to get your new business venture started.

2. Do you have an agreement in place with your key family members where everybody agrees with what you are venturing into and everyone understands the risks and potential family stresses that might occur? You’ve got to have “buy in” so as to not jeopardize marital and other family relationships.

3. Referring to the SBA Step 4, do you have your business banking account opened and do you have a relationship (such as credit lines, loan agreements, etc. as applicable) with your banker to help you deal with any financial issues that may arise in the course of running your business? Keep in mind that most start-up businesses don’t generally show profits for at least 6-9 months and perhaps even longer. You should have a budget in place to account for this and your banker can provide guidance to you.

4. Have you made a list of all the key functions (such as human relations/personnel, advertising, financial operations, sales and marketing, employee training, etc.) that will need to be performed in the course of running your business and have you made assignments in the sense of who will be responsible for performing these functions? In the beginning, you may be the one that has this initial responsibility, but, as your business grows, you will need to delegate these functional responsibilities to others in your company.

5. Are your record keeping and accounting systems ready to go? Do you have an accountant who can help you with setting up your bookkeeping structure, tax planning strategy and payroll setup?

6. Referring to SBA Step 10, if you plan to hire employees, do you have a plan for preparation of an employee handbook that spells out all business rules and policies that are consistent with applicable labor laws and regulations?

7. Do you have legal service available to you if you need it? It would be prudent to have your attorney review all lease and rental agreements, as well as all other potential liability agreements and contracts, before you sign them.

8. Have you researched and do you understand all applicable laws and regulations that may pertain to the operation of your business? These would include at, a minimum, laws and regulations dealing with environmental issues (such as storage and use of hazardous materials) and workplace health and safety issues.

9. Have you identified all local, state and federal agencies that may have regulatory oversight regarding your business operations? You may have identified these agencies in your business plan (SBA Step 1), but once you commence business operation there may be reporting requirements and forms that you will need to fill out and submit on a periodic basis. Make sure you list these requirements in your master plan and schedule.

Have you given consideration to an Advisory Board to help guide you through the operation of your business? Having a “sounding board” of knowledgeable people to consult with as you go down the path of being an entrepreneur will help keep you on track and can give you guidance as to how to deal with important business issues as they arise. It could be a “lonely journey” without friends to talk to!

Have you met all of your business insurance requirements? If you are going to run a professional services company, you may need professional liability insurance. If you plan to manufacture and/or distribute products, you will probably need product liability insurance. If you hire employees, you will need Workers Compensation insurance. Depending on the size of your business in terms of number of employees, you may need to provide health insurance. You can expect to need business property insurance (fire and theft) and your landlord will want to be named as an additional insured. The point here is that you should have an insurance agent/advisor who can help you get all required coverage in place before you start your business. Remember, insurance costs need to be budgeted for in operating your business.

10. If you need office equipment (such as furniture, computers, copiers, telephones, etc.) and/or production equipment and related machinery and tools to operate your business, have you made all the necessary arrangements to make sure these essentials are in place when you open your doors?

11. Do you have sales and marketing brochures and literature completed along with scheduled advertising programs identified and ready to be implemented? Your marketing plan should have been presented in your business plan (SBA Step 1). Now is the time to implement it.

12. Have you done your “pricing homework”? If you are starting a services business, do you know what to charge for your services? If you are going to sell and/or distribute products, do you know what to charge for these products? Remember that pricing your products or services is one of the most important business decisions you will make. You must offer your products or services for a price your target market is willing to pay and one that produces a profit for your company; otherwise, you won’t be in business for long. You should have this information in place before you ever talk to a customer.

13. Could your business benefit from the use of social media such as Facebook, Twitter, etc.? If so, do you have a plan for doing so. If applicable, this should be an integral part of your marketing plan that you could probably start early in your start-up activities.

14. Do you plan to have a web site? If so, you will need to not only design it but also select your domain name. These are things you can do before you open your doors.

If your business involves manufacturing and/or distributing products, then there are some additional checklist type items that you need to consider such as:

1. Have you identified your vendors, suppliers and distributors that you will need and do you have agreements in place?

2. If you will need any special equipment and tooling to operate your business, have you placed orders and made arrangements to get these items delivered to you so as to not delay the start of business operations?

3. Do you have a system devised for tracking inventory and determining when to reorder?

4. Do you have quality control procedures and processes defined to be implemented when you start manufacturing and inspection operations? If you are going to be required to have ISO and/or UL type certification for your products, then investigating what is involved before opening your doors would be a prudent thing to do.

5. If you are either importing or exporting goods, do you know what is involved such as applicable U.S. Customs regulations and the use of Customs brokers if necessary? This is an example of the type of homework you could do before starting your business. There may be applications and registration type forms that you could get completed and submitted before opening your doors.

6. If you have any intellectual property such as patentable products, copyrights and trademarks that you would like to protect, than have you taken the necessary steps to do this? Registering copyrights and trademarks can be done in a relatively short period of time, but filing for utility patent protection can take 2-3 years before the patent is issued. Hence, why wait? Start this process as soon as possible.

Admittedly, all of the above checklist type items may not apply to your particular new business venture, but you should at least peruse them to make sure you haven’t forgotten anything. The key is to get as much of a running start as possible. Remember SCORE counselors can not only help you with the preparation of your business plan but also with the steps required to run a successful business.

Monday, July 14, 2014

Impact of Minimum Wage Changes on Small Businesses

image This article was written by Robin Noah, SCORE Orange County Business Mentor

Just about every state is going through a minimum salary change. Take a trip through the internet regarding minimum wage increases and your eyes will be opened.

In California most employers are aware that California’s minimum wage for non-exempt employees will increase from $8 per hour to $9 per hour on July 1, 2014, and to $10 per hour on January 1, 2016.   These upcoming minimum wage increases are significant because they also impact the minimum salary for exempt status employees, and commissioned inside sales employees.

Exempt Class: To be classified as an exempt employee the employee is required to meet certain requirements with regard to the type of work they are doing - they also must meet a minimum salary test.  Additionally California law requires that an exempt classified employee must earn a monthly salary that is twice the state minimum for a full time employee (40 hours per week).  

The current minimum salary for a full time, exempt employee is $33,280 per year.  This will increase on July 1, 2014 to a minimum exempt salary of $37,440 per year.  By 2016, employees will need to earn at least $41,600 per year to meet the minimum salary test for exempt status.

Inside sales: State minimum wage also impacts the pay of commissioned inside sales employees.  Under California law, an inside salesperson will be exempt from overtime pay if they earn more than 1.5 times the state minimum wage  and more than half their income comes from commission.  This means that in order to be exempt from overtime pay after July 1, 2014 an inside sales person must earn at least $13.51 per hour, and starting on January 1, 2016 an inside sales person must earn at least $15.01 per hour.

Consider that in many businesses, starting pay will rise to levels higher than minimum wage. Fast-food employers in metropolitan areas often do not start employees at minimum wage.

Frequently these employers offer starting wages between $.50 and $2 above minimum wage to attract better-qualified employees. Raising the minimum wage may mean that employers interested in such business practices will need to pay between $10.50 and $12 per hour to new employees.

As you can see exempt employee salary increases, compliance costs, seniority costs and competition costs create hidden costs that significantly affect a large portion of many industries including the restaurant industry in Los Angeles which is looking for a minimum wage of $15.00 an hour.

Since there has been increase in class action litigation on the issue of whether employers are properly calculating the “regular rate” for minimum wage and overtime purposes, employers should conduct internal audits of their companies’ payroll and wage payment policies and practices.

Keep in mind that in California, unlike Federal law, the minimum wage rate must be separately paid for "each hour worked" rather than as the average of the compensation for all hours worked in a week.  As a result, "piece rate" or performance-based compensation systems must ensure that each category of employee work time is generating sufficient compensation to comply with the new standards. So even if the employee works less than 40 hours a week they are entailed to overtime for any day worked more than 8 hours unless there are labor or government contracts in place.

Smart employers will audit their pay practices to ensure that they are compliant with all State and Federal wage and hour laws. Minimum steps to take are: a) an audit of pay practices, b) the restructuring of pay agreements, c) updated job descriptions, d) updated policy and employee handbooks.

The issue of minimum wages is not going away and there is little room for variances, if any. Take time to learn how the law will impact your specific industry. If you are concerned about your payment practices see an attorney that specializes in human resources law.

(This article is generic in intent and not to be considered as legal advice)