Washington Small Business Development Center - Longview

What Makes Your Banker Tick?

2011-05-10T12:25:00.000-07:00

It is unfortunate that business owners frequently consider their lender an adversary rather than a team member. Mark Twain once wrote ‘A Banker is a fellow who lends you his umbrella when the sun is shining and wants it back when it starts to rain.’ In today’s world banker jokes are probably second only to lawyer jokes.

In this article, I would like to suggest that business owner’s reconsider this common attitude toward banking and, instead, consider the benefits of treating your lender as one of the members of your management team.

One of the first steps in building strength in your lender relationships is to become more knowledgeable about bankers in general. To this end, you might consider reading the book ‘The Small Business Insider’s Guide to Bankers’. This publication does a nice job of providing a synopsis of how the banking industry operates, how to speak the banker’s language and how to turn your banker into an advocate for the growth and success of your small business.

Uneasy relationships, with a lender, can be traced back to:

• Business owners who do not understand the most basic facts about the business of banking.

• Using the wrong bank or the wrong financing

• Failing to understand the four P’s of a perfect loan proposal and what it means to ‘package’ a loan.

• Failing to understand what makes your business ‘bankable’

• Failing to understand your commitments and the implications of resenting your lender’s requests for information.

• Not valuing a long-term relationship and how it can impact your survival as a business.

• Turn-over in the banking industry and the need to continually nurture new relationships

Following are five positive steps you can take to improve the relationship with your lender:

1) Consider reading ‘The Small Business Insider’s Guide to Bankers’ to learn more about why and how your lender does business.

2) Invite your lender to visit your business and help him or her gain a better understanding of your operation.

3) Provide your lender with accurate, timely financial information. Not only is it a good idea to have this information for internal use, it is also a condition of your loan commitment to the lender.

4) If you want to communicate more knowledgably about your financial status, consider the Profit Mastery Program offered through the Small Business Development Center.

5) Do not blind-side your lender. Be sure to keep your lender informed of critical issues affecting your business.

If you need assistance in the development of a loan package or would like to explore the Profit Mastery Program, you can access services through the Small Business Development Center in Longview.

IS YOUR IDEA FEASIBLE?

2011-03-25T14:17:00.000-07:00

Are you considering an expansion project or the purchase of another business? Are you anxious to run to the bank, get a loan, and open your new division or buy that new business? STOP! Before you pump cash from your existing business into an expansion plan, you want to know if it has a chance to succeed.
A common mistake made by many people is to blindly grow their business thinking that increasing sales will result in increased profits. A feasibility evaluation will allow you to make a more informed "go" or "no go" decision. A sampling of topics that should be honestly appraised includes:

Is there really a demand for the new product or service? Is that demand sufficient to fund growth or will the existing business be compromised by the drain on cash flow?
Have you researched market demand or have you just assumed that people need or want your product or service?
Does your product or service satisfy an unfulfilled need?
Will your product or service serve an existing market in which demand exceeds supply?
Will your product or service be competitive based on its quality, selection, price or location?
Do you know who your customers will be?
Do you have the internal capacity, i.e. equipment, personnel, parking, to handle the growth?
Do you understand how your business compares with your competitors?

Study the Market

Ultimately, your idea must fulfill a need for your buyers and must do so in a way that's somehow superior to the competition, however you define it. If you want to be sure that your idea will do these two crucial things, you need to know as much as you can about the following:

Personal knowledge. Understanding the industry is vital to assessing the market for a product or service. Personal knowledge of the industry develops from having contacts in the business, personal experience and a general feel for the business.
Competition. Who are your competitors? What are your competitors’ strengths and weaknesses? What are your competitors planning to do next? What are your competitors’ spending trends? A survey of the competition may be needed to determine if there is a niche or room in the market for another business. This can be done by observing competitors' businesses. How busy are they? What problems do the businesses seem to have? What type of customers do they have? Observation helps to determine the size of the market and problems businesses have in serving that market. It may be helpful to develop a Strengths-Weakness-Opportunity-Threats (SWOT) matrix to summarize this information.
Customers. Do you know who your customers are? Do you understand why, how and when they will buy your products or services? Did you know that 80% of your business likely comes from 20% of your customers? What are the characteristics of those ‘most valuable customers’? Will they be interested in your new products/services?
Secondary research. Finding information that is already published, through searching the library or Internet, is necessary to quantify the market and to verify your findings from the above three steps. Obtaining outside validation that the market potential exists and is yet untapped or is capable of supporting your business is critical. How big is your market? Is it large enough to sustain your business and competition? What is the growth trend for the next five years? Once a market has been identified, what is the size of the actual market that you can compete in? The actual market segment that you can sell to may be a small fraction of the total market.

Determining the feasibility of your project is just as important for a pre-existing business as it is when you first start a business. If you fail to determine whether your project is feasible before making an investment, you may jeopardize the long-term health of the business that you have worked hard to create. Contact your local Small Business Development Center if you need assistance in this area.

Excerpts were taken from an SBDC publication and modified by Susan J. Hoosier, a SBDC Certified Business Advisor with the Longview Small Business Development Center, which is part of the 24 statewide offices of the Washington Small Business Development Center (WSBDC) network. The WSBDC offer in-depth, confidential, and no-cost management advice to businesses within Washington State. To locate your local SBDC advisor please visit the SBDC web site www.wsbdc or if you or your business is close to the Longview WSBDC office you can contact Susan Hoosier at shoosier@wsu.edu or 360-442-2946.

Five Steps to Defining and Delivering Your Unique Value Proposition

2011-01-04T08:48:00.000-08:00

In today’s increasingly competitive business landscape, it is vitally important to develop a clear statement of the tangible results a customer gets from using your products or services. This, in a nutshell, is your ‘value proposition’. Developing a powerful and tangible value proposition will set you apart from the competition and entice your prospects to investigate your products and services. The ability of your company to back up the value proposition will be critical since a value proposition, for all effects and purposes, is a promise that you make to your customers.

The number one response you don’t want prospects to ask, or even think, after hearing your value proposition is, ‘so what?’ Strong value propositions deliver tangible results.

Examples of weak propositions:

It’s the most technologically advanced system on the market. So what??

We offer training classes in a wide variety of areas. So what??

Example of strong proposition:

We have been in business since 1960. What that means to you is we are dependable and our money-back guarantee has been a solid commitment to our customers for over 40 years.

Your value proposition should be something that can be incorporated into your elevator speech, i.e. a short but interesting and focused description of the work you do and the solutions you provide. It should last no more than 30 seconds (the length of an elevator ride).

Example of a value proposition incorporated into an elevator speech:

My name is Jane Smith. I am a consultant with …., where I have helped over 30 small biotech companies form business partnerships with universities and research labs in 20 states.

How can you develop your own value proposition?

1) Describe what your business provides in terms of tangible business results to clients.

2) If you can easily ask the question, ‘so what?', when you read the description you have created in 1) above, then you are probably describing a feature (characteristic) rather than a benefit (takes away your client’s ‘pain’). Talk to your existing customers to find out what value you bring to them.

3) Use enthusiasm to improve the persuasive power of your value proposition. This may take some practice but will become easier if your value proposition focuses on customer needs.

4) Never assume that your prospect knows even the most obvious features and benefits about your company.

5) As your company grows, your value proposition may become diluted. Do not lose track of the fact that the value proposition is all about meeting your customer’s needs and taking away their pain.

Here is an example of a strong value statement:

‘ XYZ Corporation is the exclusive provider of patent-pending project management software for paving contractors, saving U.S. contractors over $34M in 2005.’

Keeping these guidelines in mind will help you create a Unique Value Proposition (UVP) for a new business or ‘discover’ one for an existing business. Remember to keep it clear, concise and emphasize benefits and solutions for your customers!

This article was written by Susan J. Hoosier, a SBDC Certified Business Advisor with the Longview Small Business Development Center, which is part of the 24 statewide offices of the Washington Small Business Development Center (WSBDC) network. The WSBDC offer in-depth, confidential, and no-cost management advice to businesses within Washington State. To locate your local SBDC advisor please visit the SBDC web site www.wsbdc or if you or your business is close to the Longview WSBDC office you can contact Susan Hoosier at shoosier@wsu.edu or 360-442-2946.

ELEVEN THINGS TO CONSIDER WHEN BUYING YOUR FIRST COMMERCIAL BUILDING

2010-12-14T12:11:00.000-08:00

Many of you who own and operate your own business have been leasing your space for years and may be thinking about taking the first step to owning your own building. It is a good time to consider purchasing because interest rates are down, many properties are available, and it may be a way for you to build equity in your business. But before you take the leap, there are some important things to think about. You’ve probably already given some consideration to the physical attributes of the property if you’ve actually got one in mind right now. But you may not have thought about the following:

1) Do you have sufficient down payment?

2) Have you completed cash flow projections and included the new financing?

3) Will the new debt put existing operations at risk?

4) Will the property be marketable if you decide to resell in the near future?

5) Will this property work as the business grows?

6) Is the building well maintained or is there a lot of deferred maintenance?

7) Have you taken into account the moving costs and advertising costs associated with a new location?

8) Is the property appropriately zoned?

9) Will you need any environmental permits for the new location?

10) Have you taken into account any long-term costs for repairs/upgrades?

11) Are you working with a reputable commercial agent?

It’s easy to fall in love with a particular piece of property and to overlook some of these points. It is also easy to overlook how your customers may react to a new location and whether parking will be adequate for both your customers and your employees.

Be sure to do your analysis before you sign a purchase agreement and be sure to consider appropriate language for financing and regulatory contingencies. A reputable commercial agent can assist you but you may also want legal counsel before signing on the dotted line.

It’s a good time to be looking at commercial property! If you need assistance with the financial analysis, contact your accountant or use the services of the Small Business Development Center.

This article was written by Susan J. Hoosier, a SBDC Certified Business Advisor with the Longview Small Business Development Center, which is part of the 24 statewide offices of the Washington Small Business Development Center (WSBDC) network. The WSBDC offer in-depth, confidential, and no-cost management advice to businesses within Washington State. To locate your local SBDC advisor please visit the SBDC web site www.wsbdc.or/map or if you or your business is close to the Longview WSBDC office you can contact Susan Hoosier at shoosier@wsu.edu or 360-442-2946.

Open Book Management – Is it for You?

2010-09-30T12:45:00.001-07:00

Jack Stack is probably not a house-hold name, but some business owners might have heard his name referenced as the founder of the business philosophy known as Open Book Management. You may be wondering ‘what is Open Book Management’? To quote directly from the Open Book Management website (http://greatgame.com/tour/what-is-it/ ) ‘Open-Book Management is a way of running your company that gets everyone, at all levels of the business as informed, involved and engaged as you are in making the company successful. It’s about employees understanding how profitability is driven, how assets are used, how cash is generated, but most importantly how their day-to-day actions and decisions can make or break your business.’

The next question you may want to ask is ‘why would I want to share the financial information and the decision-making process with my employees?’ There are several reasons you may want to consider doing so:

Providing financial details to employees can help encourage out-of-the box ideas for your business.

Added employee focus can benefit your bottom line, create efficiencies and maximize each employee’s value.

Employees feel a greater sense of ownership and urgency and, in turn, can jump-start innovation and teamwork.

If you pay some staff members on a percentage of gross income, financial transparency can help those employees better understand why their efforts directly impact their compensation and help them better understand how they can increase their own reward.

Are there dangers in revealing financial information? Absolutely! If you fail to develop a thoughtful strategy for sharing financial information, fail to educate your employees about understanding the financial information, fail to communicate adequately or have difficulty explaining your financial information, it may result in false expectations and employees fearing for their job security.

If you want to know more about the Open Book Management strategy, you might find ‘The Great Game of Business’, written by Jack Stack, as a good place to start. INC. Magazine has called Jack Stack the ‘smartest strategist in America’ and he was listed by Fortune Small Business Magazine among the ‘top 10 minds in small business’. You might find that he provides inspiration for a new way of doing business!

Article written by Susan Hoosier, Certified Business Advisor and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA 360-442-2946. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

The Real Costs of an Accident and Three Ways to Reduce Them!

2010-08-19T14:06:00.000-07:00

I recently received a document, from Chris Bowe, Regional Program Manager for the Department of Labor and Industries, describing the real costs of an accident. Just as a reminder to you, I thought I would repeat the information in this column and provide three ways that you can reduce the risk of incurring these costs:

Direct-Insured Costs

• Worker’s compensation premiums
• Medical expenses (hospital, doctors)

Indirect- Uninsured Costs (Out-of-Pocket)

• Time lost from work by injured employee
• Lost efficiency
• Lost time by supervisor
• Training costs for new/replacement workers
• Damage to tools and equipment
• Loss of production
• Damage from accident: fire, water, chemical, explosives, etc.
• Failure to fill orders/meet deadlines
• Overhead costs while work was disrupted
• Other miscellaneous costs

No matter the size of your business, you can access three services, for free, that can help you reduce the risk of injuries, reduce the risk of hiring or retaining high-risk employees and speed the process of getting an injured employee back to work as quickly as possible. Your Worker’s Compensation rates already pay for these services so why not use them. In a nut shell they are as follows:

1) Reduce the risk of an employee getting hurt by requesting a consultation with a safety and health expert (DOSH Consultation) to identify potential safety and health concerns and industrial hygiene issues. Take a proactive approach to avoiding problems by requesting a consultation.

2) Identify other potential risks by asking for a Risk Management Consultation to gain a better understanding of how to manage claims, reduce the risk of hiring the wrong people and otherwise setting your business up for potentially higher premiums.

3) Finally, learn about the Early Return-to-Work Program and how important it is to maintain good communications between your injured employee and the doctor involved in treating the employee. (See the guide at: http://www.lni.wa.gov/IPUB/200-003-000.pdf)

Valuable resources from the Department of Labor and Industries can be accessed on their new website: http://www.lni.wa.gov/

The above information was adapted from materials provided by the Washington Department of Labor and Industries and summarized by Susan Hoosier, Certified Business Advisor and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA 360-442-2946. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

EVERY BODY IS TALKING ‘GREEN’

2010-07-01T13:48:00.000-07:00

All of the recent hype around green business opportunities has many business owners scratching their heads. Is this another business fad? Media hype aside, there are good reasons to believe that green business is here to stay for the following reasons:

• Improving your bottom line by reducing waste, saving energy, and increasing efficiency makes practical sense.

• Preventing regulatory problems related to pollution or waste disposal can help businesses avoid financial penalties/fines, training costs, disposal costs and insurance costs.

• As cleaner technologies are being developed, it only makes sense to adopt that technology rather than continuing to work with less efficient current standards.

• Maintaining a competitive edge in an increasingly competitive and regulatory environment will be imperative as the market demands more emphasis on ‘green’ products.

How should a business owner get better educated about becoming a ‘green’ business? If you want to start with some basics, you might want to refer to the following resources:

1. Google ‘Triple Bottom Line’ and become acquainted with some of the terminology that is being used in the ‘green’ world.

2. Check out www.business.gov/start/green-business/green-guide.html to find some practical ways to take steps toward becoming a ‘green’ business.

3. Check out the Green Business Workbook at the Small Business Development Center website: http://www.wsbdc.org/green-business

By taking these three steps, you will find that there are some simple steps that you can take to:

• Improve efficiency

• Reduce waste

• Become a good business citizen and neighbor

• Meet consumer needs and desire for green products.

If you have further questions regarding ‘green’ strategies, contact your local Small Business Development Center for assistance at 360-442-2946.

Article written by Susan Hoosier, Certified Business Advisor and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA 360-442-2946. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

SEVEN CUSTOMER RETENTION STRATEGIES

2010-05-24T08:52:00.000-07:00

Do you direct all of your energies to getting new customers? If so, you may want to take a closer look at the source of your sales since it is very likely that 80% of your business is coming from repeat customers. If you find that 80% of your business is coming from 20% of your customers, you may want to consider some strategies for staying in touch with those customers! Retaining customers and serving them over their lifetime can mean thousands of dollars for your business.

Some practical ways to develop action around customer retention strategies might include some of the following steps:

1) Communicate with your existing customers on a regular basis.

2) Show your appreciation for their business and nurture customer loyalty

3)Look for ways to build trust between your business and your customers

4)Don’t make it easy for your customers to switch to the competition

5)Expand product lines to provide more products or services for your customers

6) Anticipate the changing needs of your customers ( selling other parts of your line to the same customers) and up-selling (selling more per order) to increase the average sale to each customer.

If you’ve lost customers, you may want to develop some strategies for getting them back. In order to implement a strategy, you need to have a database of previous customers. So, if you don’t keep a database, it stands to reason that that should be the first step in your strategy: Develop a database!

Next, you need to remind them about your business and tell them you want them back! However, you may first need to find out why they stopped coming to your place of business and, if you failed to meet their expectations, you need to make it right.

You’ve already invested a lot of money in the customers you retain and the customers you have lost. For that reason alone, putting some additional energy into retaining customers, and reactivating lost customers, makes sense for your business.

THE RULE OF THREE IN BUSINESS

2010-04-15T13:42:00.000-07:00

The number ‘three’ has great significance for writers, story tellers and public speakers. According to some sources, the ‘power of three’ is a mystical number that is used for telling a fairy tale (three bears, three little pigs, etc.) to identifying the basic structure of life (carbohydrates, protein, fat). Speakers are encouraged to use three thoughts to convey completeness, wholeness, roundness.

I did some research recently on this topic as a result of hearing someone speak about the importance of using ‘odd’ numbers in pricing products and describing products. For example, Listerine kills 99% of germs instead of 100%.

What does this have to do with your business? It occurs to me that I often overwhelm my business clients with too much information and too many steps to complete before our next meeting is scheduled. As a business owner, I also remember feeling overwhelm by the amount of information that I needed to absorb to feel comfortable with the financial, operational, and regulatory issues of my business. If we want to make progress toward a specific goal, it would make a great deal of sense to simplify the process and make it more manageable by setting one goal in each of these areas.

Under each goal, you might consider listing three strategies you intend to use and under each strategy, list three actions (actions link your strategy to operations) you intend to take. Identify how you intend to quantify and measure performance and put a time limit on it. Each goal needs to meet the SMART criteria, i.e. Specific, Measurable, Achievable, Relevant, Time Bound.
By using the Power of Three in this way, the task becomes more manageable, everyone stays more focused and things get done!! There is nothing more satisfying than reaching goals you have set for your business.

Some of you might be saying to yourself ‘I have no time to set goals or go through this process. I’ve got too much to do!’ I would suggest to you that you might need to step back from your business and use the power of three by setting some goals that give you perspective in other areas of your life. A business cannot be run very effectively, for very long if you ‘run out of gas’ on a personal level and your business will suffer if you fail to set goals and reach them.

Article written by Susan Hoosier, Certified Business Advisor and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA 360-442-2946. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

There Is More to Your Business than the Finances!

2010-03-16T12:23:00.000-07:00

There are many ways to define success in the business world but most small business owners tend to look at financial statements and key financial ratios to determine how well they are doing. While it is important to understand your financial statements, and to use them as a management tool, there are equally important pieces of information that you may want to measure to determine overall success.

In the early 1990s, Harvard University professor Robert Kaplan developed the Balanced Scorecard as a means of measuring key success factors that cover not only the financial aspects of the business but it also measures success in three other components of a business: The customer component, the internal business processes component and the learning and growth component. Professor Kaplan proposed that each of these components should be measured, just as you might measure your financial status, by using metrics you have identified as the key drivers in your business. After all, when you get an annual physical exam, the doctor doesn’t just listen to your heart beat, he/she looks at the whole body to determine overall health. Why should your business be any different?

You can’t generate a profit over the long haul if you do not have a good product or if you frustrate and drive off customers and employees. While the financial analysis of your business may give you clues of something else happening, the financial statements won’t tell you why customers are being driven away.

However, if your business can identify key drivers that measure customer satisfaction, you can begin gathering metrics that will tell you whether you have loyal, repeat customers. For example, you may want to track the gains and losses of customers, complaints, market share relative to competitors and repeat business. You may have difficulty implementing a means of measuring your success in this area if you do not maintain a customer tracking system so your first step might be implementing such a system.

Satisfied customers are the result of producing reliable and consistent products and services. For this reason, you also want to measure your internal processes to determine if there is any way to improve on your cycle time for key processes, to reduce delivery mistakes, to reduce recalls, or to improve safety during production.

Finally, your company’s infrastructure needs to undergird the strategies and goals that you quantify in the financial, customer and internal components mentioned above. This means that you need to develop a strategy and a means of measuring the levels of knowledge achieved through training and education. You might also want to measure the increased capacity that you might gain from improvements to technology and to the work environment.

If you want to do a little reading about some of these concepts, you may want to pick up ‘Keeping Score’ by Mark Graham Brown. Needless to say, the overall health of your business is dependent on a number of factors. The guiding principle behind the Balance Scorecard approach is ‘what gets measured gets done’. Research suggests that those companies that measure their performance out-perform those that do not, so you may want to give some serious thought to developing metrics for your business that will help you meet your business goals.

Asking for a Loan? Common Mistakes Made by Businesses

2010-02-18T09:21:00.000-08:00

Many business owners have given up asking their lender for money these days. Perhaps they have already been told ‘no’ more than once and they cannot get a grasp on how to move forward as a business without being able to access capital. I would like to suggest that there are some very positive steps that any business can take that will not only improve the business’s financial position, but will help any business move to a more bankable position:

1.) Assuming that your business has profits, quit taking all of the profits out of your business! You cannot grow a business without profits. Your banker knows that and so should you.

2.) If you are not profitable, find out why. If you don’t know how to analyze your financial information get help! Contact your accountant or your business adviser if you have one on retainer. You can also access services through your local Small Business Development Center. Profit Mastery is a business finance educational program that you can access through the Small Business Development Center and it provides down-to-earth financial management tools that any business owner can use.

3.) Analyze your customer base and begin developing a customer relationship management system. You have ‘gold’ in your customer information and ‘mining’ that gold can add to your bottom line. Since 80% of your business likely comes from 20% of your customers, find out everything that you can about those customers and then develop a strategy to find more of them!

4.) Make sure your financial information is accurate, that you review it regularly and that you know which items could be a red flag for your lender. For example, if you find out that your Balance Sheet reflects negative retained earnings you should know that your lender will not be pleased. For that reason, you may want to go back to point number 1) and stop taking all the profits out of your business!

5.) Build a strategy for success. This takes planning and if you need to have someone help you through the planning process contact the Small Business Development Center. Building a strategy takes a lot of thought. I recently came across the following quote which sums up, very succinctly, why the typical business owner may have difficulty developing a strategy for their business:

“There is no labor from which most people shrink as they do from that of sustained and consecutive thought; it is the hardest work in the world.” Wallace D. Wattles
If you find it challenging to stay focused on the planning process, find an adviser to help you through the planning process. Again, this could be your accountant, a business consultant or the Small Business Development Center.

I have another list, in my office, which is specific to documentation requirements for developing a loan package. I use that list whenever I work with clients to help them develop a loan proposal. But presenting a loan proposal to your lender, before you lay the foundation for success, is like putting the cart before the horse.

If you need assistance contact your local Small Business Development Center for confidential, no-cost services: 360-442-2946 or http://lowercolumbia.edu/smallbus
Article written by Susan Hoosier, Certified Business Adviser and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA 360-442-2946. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

Revisiting Your Credit Strategy

2010-01-12T08:50:00.000-08:00

Monitoring and understanding your cash flow is probably one of the most critical aspects of business management. Cash flow has always been important to businesses, but many business owners have recently been reminded of this in a very unpleasant fashion; i.e. the cancellation or reduction of a vital credit line.

Business owners typically concentrate their efforts on year-end tax planning and strategizing for increased sales in the coming year. It is rare, in the planning process, to see businesses pay equal attention to planning for cash flow by reviewing the business’ credit strategy (the way that bills are paid and the way in which you receive payments for goods and services that are sold).

Following are some tips on things to consider when you review your credit strategy:

Think twice about paying early on your business debts since you may use up cash reserves that may be critical for survival.

You may need to consider asking your customers for more financial information to determine whether they have the capacity to pay for goods and services purchased on account.

You may need to reconsider the length of time that you are allowing your customers to pay on their accounts or you may need to consider asking for a larger deposit or a greater percentage of the total cost of a project to reduce the risk of bad debts.

Consider taking credit cards, if you are not doing so already, since the banks’ merchant fees may be a small price to pay for not worrying about collecting from some of your customers. It may be more important for you to have the cash in the bank!

Use the maximum time allowable to pay your suppliers on account unless you will lose the benefit of a discount.

The economy is still tight, funding is tough to find, so do not assume that your existing strategy will continue to work for you. Instead, be proactive about addressing any policies that might increase your risk for bad debts.

Clean up your financial statements, strengthen your equity position in your business, and continually monitor your cash flow position.

If you need assistance in developing a credit strategy or assistance in analyzing your cash flow, contact your local Small Business Development Center for confidential, no-cost services: 360-442-2946 or http://lowercolumbia.edu/smallbus

Article written by Susan Hoosier, Certified Business Advisor and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA 360-442-2946. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

Preparing for a Disaster

2009-12-18T10:03:00.000-08:00

In Southwest Washington, we are approaching the time of the year when flooding may be a common occurrence in some areas. We have already experienced several flood warnings in some areas. The Cowlitz-Wahkiakum Council of Governments is currently working on a plan that will provide local businesses with tools that will help businesses plan for potential disaster. You will be hearing more about that program in the months ahead.

Meantime, it would be advisable to plan for possible flooding, particularly if your business is located in a vulnerable area. Even if it isn’t, flooding in your community could significantly impact your viability as a business. According to the Washington State Office of Emergency Management 40% of small businesses that close, due to a disaster event, never re-open. Coupled with current economic conditions, this number could escalate dramatically if a natural disaster were to occur in the near future. In addition, the Office of Emergency Management also notes that ‘85% of the critical infrastructure in the U.S. is owned by private industry’.

You can mitigate your chances of survival, as a business, by using many of the tools that are already available to you through the Office of Emergency Management. The business portal for disaster preparedness can be accessed at the following website: http://www.emd.wa.gov/preparedness/prep_business.shtml

You can download many documents, including sample disaster announcements, from FEMA’s website at: http://www.ready.gov/business/publications/index.html . In addition, many of the templates can be filled out on-line. Other resources that are available to you include your local County Department of Emergency Management and the Small Business Development Center.

At this time of the year, flooding is probably the disaster scenario that comes quickly to mind. However, disasters can occur at any time and can include earthquakes, fires, information technology disruptions and any number of other disasters that may have huge implications for your business. Don’t wait until disaster strikes. Instead, reduce your risks by planning for survival. If you need assistance staying on task in this area, utilize the services of your local Small Business Development Center to help you strategically plan for your business in this area. Services are available at no cost to business owners and sometimes it helps if you have someone helping you take the necessary steps to reduce risks for your business. Call 360-442-2946 if you would like to access services.

ARE YOU LOOKING FOR WORK OR THINKING ABOUT STARTING A BUSINESS?

2009-11-05T09:58:00.000-08:00

In the business community, business owners are continually looking for well qualified people. Since so many people have recently lost their jobs, it seems like there should be a way that the unemployed can identify which businesses are hiring so that the business owner and the unemployed worker can find one another. In this article, my goal is to provide resources for the unemployed. I realize that this is not the primary reason that a Small Business Development Center exists. I also realize that there are well qualified people working with the unemployed to provide as many resources as possible. However, Small Business Development Centers are in a unique position. As Business Advisors, we may be aware of opportunities that exist that the general public may not understand.

Since Stimulus dollars are being used to support many public projects, one might want to find out who is doing business in the public arena. For example, businesses that want to do business with the federal or state government must be registered in specific databases. Following is a list of those databases:

Federal Level: www.ccr.gov
Washington State: www.ga.wa.gov/EAS/smlwrk-roster.htm
http://www.ga.wa.gov/WEBS/index.html
County Level: Do a search for the Small Works Roster in the County of interest

Any business that describes itself as an 8(a) certified company, a HUBZone certified company, SDB certified company, or woman-owned company, may get priority on some contacts. Keep in mind that businesses on these databases do not need to be construction-related businesses. Government contracting officers will also use these lists to identify sources for materials and services. Many businesses wrongfully assume that there is no reason to pursue the above-mentioned certifications because they may not be in the construction business. Government databases are not created simply for the construction trades. Business owners who may be reading this article and would like to know more about doing business with the government, can access no-cost advising services through the Small Business Development Center by contacting the SBDC at 360-442-2946. Any business in Cowlitz or Wahkiakum County could, potentially by HUBZone certified!

While there is no guarantee that a business that is listed on the government databases is hiring, they may be hiring in the future if they are successful in marketing to the government. As a job searcher, you may have better success finding businesses that are in the hiring mode by searching for businesses who are attempting to do business with the government.

If you have been active in a trade association, at any point in your career, search the career listings on the trade association website. In addition, check out the state website for Washington State higher education jobs at: http://careers.wa.gov/HigherEducationJobs.htm

Finally, do not forget that local businesses may have job listings on the Lower Columbia College job listing site at: http://collegecentral.com/lowercolumbiacollege/

Networking has always been one of the best ways to tap into job opportunities. In addition, if you have not been on the job market recently, hone your interviewing skills and develop a strong resume by using the services of your local WorkSource Office (711 Vine Street, Kelso, WA). You may also want to ask your WorkSource Advisor about the Self Employment Assistance Program if you have been considering business ownership.

If you are thinking about starting your own business, plan to attend the free start-up business class that is offered the last Thursday of every month on the Lower Columbia College campus. November’s class will be held one week prior, due to the Thanksgiving Holiday. Call the SBDC for more details.

Article written by Susan Hoosier, Certified Business Advisor and Certified Economic Development Professional, with the Washington Small Business Development Center in Longview, WA. Susan has owned and operated three businesses and managed a revolving loan fund for a Midwestern Regional Development Commission.

Grants for Businesses

2009-10-15T12:39:00.000-07:00

Calls have increased lately for people who want to know more about grants for starting a business or funding a business expansion. I find it increasingly difficult to convince people that their chances of accessing grant dollars are extremely slim (to none) as more and more information is provided to the public about Stimulus Funds. Everyone seems to think that Stimulus Funds will automatically provide 'free' funding for business start-ups and expansions.

At the risk of sounding like a broken record, I would like to clarify a few points:

1) Business development grants are typically given to economic development agencies who are charged with dispensing funds through a revolving loan fund program. Although the economic development agency receives the funds in the form of a grant (and may be called a 'business development grant), the funds are disbursed in the form of a loan with typical loan payback requirements to the business applicant. There are usually job creation goals and other parameters associated with the loan. It is always wise to check on the eligibility components of a revolving loan fund before assuming that your business might qualify. Keep in mind that these funds are a loan to the business, not a grant!

2) Other types of business grants might be in the form of a municipal program where a specific municipality has applied for funds that are made available to local retail establishments to improve store-fronts or encourage other building improvements. It is typically a requirement that the business prove that they are economically viable.

3) Energy grants might be available to some businesses for specific energy-related programs. Again, the business may need to prove that they are economically viable.

4) The government may provide grant opportunities to businesses that are providing a valuable product or service that is vital to the public good. For example, if a business produces a product that will be beneficial to the war effort, the government may provide some grant funds to assist with additional research and development. When the government provides grant funding, in most cases the business needs to understand that -

The business may be required to match the funds. For example, if the business wants to request a $100,000 grant, the business will need to put $100,000 into the total project costs.

The business must show that they are financially stable and will be required to provide internal financial information to prove that they are a viable business.

The grant may have a component that requires that the business partner collaborate with an institution of higher learning to complete the research and development.

Lastly, there are numerous reports and parameters that need to be met, depending on the grant requirements.

5) In the past, the government has provided grants for child care facilities. However, grants of this nature are few and far between now that more child care facilities have been established nationwide.

Suffice it to say, anytime that the government makes a grant, it comes with eligibility requirements and, if one wants to take the time to read a Request for Proposal (RFP) one will find those eligibility requirements are clearly stated.

No matter what you read on the internet no one can guarantee that you will get a grant! There are countless 'entrepreneurial' folks who will be happy to sell you a book and sign you up for technical assistance and the cost may be as little as $39.95 up to $2,000+. Believe me, I have had clients who have purchased books and paid $2,000 for what they thought was a guaranteed grant only to find out that they were sold a bill of goods.

All government grant opportunities are posted publicly and can be accessed at no charge on official government websites. Let me emphasize here that it is the official government website that you want to research. Be wary of websites that want personal information and that have an appearance of being an official governmental website.

On the Federal level, the official site is:

http://www.grants.gov/

For the State of Washington the official site is:

http://access.wa.gov/business/grants.aspx

There are also many technical assistance providers who will promise that they can get you a government contract. Government contracts, contrary to popular belief, are not awarded in that fashion. If you want to know more about contracting with the government, see your local Small Business Development Center for no-cost advising services.

If you are seeking funding for your business, contact your local SBDC. Business advising services are available at no charge to business owners and eligible start-up operations. The Washington State SBDC website is located at:

http://www.wsbdc.org/

Do You Hate Business Finance?

2009-09-24T14:27:00.000-07:00

Not every business has the luxury of hiring its own CFO to monitor the financial health of the business. And, if you are like most business owners, you did not get into business because you love business finance. On the contrary, you probably had a passion for other aspects of your business and business finance was seen as a necessary part of business operations. Over the years that I have worked with business clients, I have had clients who were extremely diligent about monitoring their financial information and I have had other clients who rarely looked at their financial information. It is not unusual for many business owners to expect their accountant to monitor the business’ financial condition.

Is it possible that business owners that monitor their financial information are the 20% that survive and the ones that do not monitor their information are the ones that get included in the 80% of all businesses that fail within the first 5 to 7 years? That’s probably too simplistic since some business owners manage to succeed in spite of themselves and it does not necessarily mean that they have a grasp on the financial condition of the business.

If business finance does not ‘ring your bell’ how can you get a grasp on the basics so that you know more about your financial condition? Here are a few basic tips:

When a lender asks for your ‘financial statements’ they are asking for both the Balance Sheet and the Income Statement (Profit and Loss). If you provide only one of the statements, you are giving away the fact that you do not understand the relationship between these two financial documents.

The Income Statement tells you how you did last year.

The Balance Sheet tells you how you’ve done in the past.

The two statements combined, tells the ‘story’ of the business.

If you spread three years’ worth of financial statements, side by side, on a worksheet, it will be easy for you to see trends in your business that you would not otherwise notice.

The ‘Net Income’ shown at the bottom of your Income Statement is not what you have in the bank! However, it does get carried over to the Balance Sheet and it is added to or subtracted from your Retained Earnings depending on whether you post a profit or a loss.

Consistent negative retained earnings, on your Balance Sheet, reflect impending insolvency. It also means that you have either posted consistent losses or you have drained the business of all profits. Either way, it is not a good thing! You cannot grow a business without retained profits.

Just because you are profitable doesn’t mean you will survive. You will need cash to survive. For this reason, if nothing else learn how to project your cash needs, long before you need the cash.

If your accountant or bookkeeper prepares your financial statements, it will be imperative that you provide your month-end information to them as quickly as possible so that they, in turn, can provide the financial statements on a timely basis. Take the time to look at the financial statements. If you don’t understand your them but you would like to be more knowledgeable, ask for help from your accountant or call and schedule a meeting with the Small Business Development Center.

A business owner may feel embarrassed about not understanding the business financial statements. However, the only thing a business owner should be embarrassed about is not asking for help. When you are playing the part of chief, cook and bottle washer for your business, it is difficult to add the CFO responsibilities to your job description. But help is available and it is as close as a phone call away. If you want to access some basic training on business finance, call the Longview Small Business Development Center (SBDC) at 360-353-3428 or use the link in the sidebar for the Washington Small Business Development Centers to find the SBDC that serves your area.