Monday, August 31, 2009

Crunch Those Numbers

It's hard to believe, but many small business owners don't really know where the numbers are at in their business.

For starters, few companies have regular professional business valuations, so they don't have a realistic idea what their firms would fetch on the open market.

But, even worse, a lot of entrepreneurs don't even have a handle on their income, expenses and asset value - let alone the more complicated quarterly reports that larger corporations have prepared by their financial teams.

At the very least, it’s crucial for entrepreneurs to know how much money is coming into and going out of their companies each month. It’s not okay to guess, wish or fudge on the numbers! If you don’t know where your company is financially at any given moment, it’s likely that your business will slip further and further into arrears – until it may be too late to turn things around.

Each month, with the help of your bookkeeper or accountant if you have one, sit down and calculate income and expenses. Be specific! For example, include fixed costs such as rent, insurance and payroll, as well as variable costs like advertising and marketing. On the income side, don’t include unpaid receivables until they are actually collected.

Don't forget to include calculations for taxes, overhead and consulting fees, if you have them.

You can purchase software for both cash flow statements and business plans from many commercial vendors, or get free templates from nonprofit agencies such as the U.S. Small Business Development Centers.

Wednesday, August 26, 2009

Failure Lessons

I interviewed a high-profile, high-powered entrepreneur and business book author recently for my podcast.

The topic of his book was leadership lessons from top CEOs. As we were chatting before the podcast taping began, he mentioned that he'd always wanted to tackle the opposite topic - lessons from failed companies and CEOs - but his publishers would never let him pursue the idea.

Apparently these geniuses are taking a cue from Hollywood producers in figuring that the public can't handle a downer.

But I told him about a book whose author I interviewed a year or so ago called "Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years."Authors Paul Carroll and Chunka Mui believed that you really can learn a lot if you study not just what to do, but also what not to do.

Well, it turns out that the book is just coming out in paperback. From the new preface, Paul and Chunka write:

"When the economy fell off a cliff as our book was coming out in 2008, any number of friends, colleagues and reviewers suggested we should quickly update it and incorporate the lessons from the mistakes that caused this crisis.

So what are those new lessons?

The short answer is: there aren’t any.


It turns out that the strategy mistakes that caused 423 major publicly held companies to file for bankruptcy since the beginning of the 1980s are the very same strategy mistakes that are bringing down huge companies now.

Many of these companies followed precisely the same strategies that others had already shown to be wrong-headed. The authors also found that the No. 1 cause of failure was not sloppy execution, poor leadership, or bad luck - it was misguided strategy.

These lessons apply equally to small firms as well as to larger ones. I really think this is a terrific read and highly recommend it.

Tuesday, August 25, 2009

Winning Presentations

When I was asked to speak to a business group recently, my friend and personal branding expert Lilli Cloud helped me prepare my talk.

The most helpful thing she did was videotape and critique my presentation.

It was invaluable to compare my energy level and connection with the audience when I was looking down, with my glasses on, and reading my talk - versus when I took the glasses off, looked up and simply told the stories I had prepared from memory.

The connection I was making while reading was close to nil. It was a completely different situation when I just used the notes occasionally to stay on track. And it really helped when Lilli told me to print out my notes in large, bold type and ditch the reading glasses (duh ....).

The other really useful thing to come out of the videotape exercise was realizing that when I spoke extemporaneously, complete with stumbles and "uhhhh ..."'s, it sounded conversational - in other words, just fine.

In the past when I've given speeches and strayed from the prepared text, I did connect better with the audience, but I would feel myself start to panic when I was at a momentary loss for words. That panic made me speed up (always bad) and lose my rapport because I was so focused on getting finished without another gaffe.

Realizing that momentary pauses and stumbling over a word doesn't sound terrible really freed me up to glance at my notes, while most of the time looking at my listeners, smiling and relating to how they were receiving my words.

In the end, it was a fun experience and I had terrific feedback.

If you have to do some public speaking, please do not take the advice of my fellow BusinessWeek.com columnist Carmine Gallo, who writes today about how to give a catastrophic presentation.

The sad thing is, I think I've seen every one of his 15 no-no's in person at some point. The worst lecture I ever attended, however, started out with technical difficulties (don't they all?) and played out with the speaker reading her entire talk off her BlackBerry.

At first, I thought she was checking her email!

The effect was just dreadful, and made worse because she was representing a well-respected organization, which dropped several notches in my mind after that day, sadly enough.

Saturday, August 22, 2009

Weekend Watermelon

Vacations are great, but the best part is always getting home. Don't you agree?

When we rolled into the organic garden last week a special surprise awaited us:



This is the largest of about six melons on our vine. Anyone know how to tell when a watermelon gets ripe enough to pick?

Thursday, August 20, 2009

A Doomed Love Affair

This post originally appeared in the STOX Scribe dated Aug. 18, 2009

I often hear from readers who have a Great Idea. They are persuaded their ideas can't be beat. If only they could get some money from somewhere (the government, maybe?) they know will make a million dollars and, more importantly of course, save humankind with their brilliant ideas.

Herein lies the danger: It's great to like your idea, but you must not fall in love with your idea.

You know how lovers in that googly-eyed romantic stage are adoringly blind to each others' faults? It's the same thing when you have an affair with your idea.

Liking your idea means you can look at it objectively, evaluate it, improve it, modify it, discard what doesn't work and jettison it entirely if it's not viable.

But if you love your idea, you risk blind loyalty. You'll refuse to see its flaws. You'll move forward with your idea stubbornly, despite evidence against it, because those people criticizing your idea are just ... wrong! They simply don't understand your idea like you do.

If you can't get enough distance from your idea to accept critiques and see its limitations, you're head over heels and likely heading for disaster. And, just like in romance, an idea affair that ends badly can be tragic.

Thursday, August 13, 2009

That Elusive Paid Vacation

It was 20 years ago next month that I took off on maternity leave from my last full-time job.

After my son was born, I confided to another mom-journalist that I was thinking about becoming a freelance writer and not returning to my job at a Los Angeles newspaper.

Her mouth dropped open in surprise. "But you ... you won't get paid vacation!" she exclaimed.

Well, two decades later I can say she was right. I still don't have paid vacation.

What I gained working from home, spending as much time as possible with my children, learning about entrepreneurship and eventually becoming a sought-after expert on small business, has more than made up for the lack of two paid weeks' leave per year. (I suppose I might have gotten up to three weeks - or maybe four by now!)

But it's true that taking time off when you're self-employed isn't easy. Unless you really want to take unpaid vacation time (which none of us can afford), you have to work extra hard planning and setting up work in advance while you're gone.

At the same time (if you're the mom), you also have to work extra hard planning and setting up your vacation reservations, itinerary and making sure everyone will be happy away from home.

The stress of all the extra work can mean that you're so wound up by the time you leave, that you wonder if it's really worth it.

But thankfully, the answer is always "yes." Just getting out of your routine, away from that ever-present home office and being with your family for a whole week is wonderful.

Here's to happy trails, low stress and August vacations! See you later this month.

Tuesday, August 11, 2009

Diamonds in the Rough

[Note: I'm pleased to announce that I am writing regularly for the STOX Scribe, a weekly newsletter affiliated with IDEASTOX, a groundbreaking web community that provides a place for individuals to save, share, develop, value and attract people and funding to their ideas. This post originally appeared in the STOX Scribe, dated Aug. 3, 2009.]

Many people seem surprised that Susan Boyle, the YouTube "Britain's Got Talent" phenomenon, got to middle-age without being discovered for her singing talent.

I'm not surprised at all. Both my parents sang and I grew up around talented amateurs who - for one reason or another - never made it big. Many of my friends today are unpublished authors, poets and screenwriters. For years, I took dance classes from a tall, beautiful woman who could have taken a place in the Broadway chorus line, but never quite got there.

The point is, raw talent is all around us. It's not unlike raw ideas, which - as we've all heard - are valued at around a dime a dozen.
What matters isn't the talent - or the idea The point is, raw talent is all around us. It's not unlike raw ideas, which - as we've all heard - are valued at around a dime a dozen.
What matters isn't the talent - or the idea - so much. What matters is what you do with it.

Developing an idea takes strategy, research, commitment and money. Likewise, someone with raw talent must invest in training, preparation, industry savvy and networking before she is likely to get noticed.

Part of it is also luck and timing. A terrific singer born in London, or Los Angeles, has got it easier than one who's lived her entire life in an obscure Scottish village. A great idea conceived in Silicon Valley has a better chance than one cooked up in Pakistan.

Most of all, developing talent and ideas takes courage. Boyle showed a lion's share of it when she stepped out in front of a hostile audience.

People with great ideas must screw up that kind of courage if they want their ideas to go beyond the raw stage and succeed on the world stage.

Garden Update

We're getting quite a show from our organic garden these days.

We started harvesting veggies on July 1 and we're still going strong. So far, we've had pumpkins, green beans, tomatoes, squash, cucumbers, eggplant, onions and radishes.

Here's a monster heirloom tomato I picked yesterday and plan to put into Tuscan Pappa al Pomodoro tonight:



If you look closely, you can see the praying mantis, Torquemada (my son named him after another "praying predator" - we call him Torquie for short) that has taken up residence in our pepper plants:



I'm normally not an insect lover, but these guys are really beneficial in the garden (they eat pests) so I'm glad he's (she's?) moved in.

The only big disappointment so far has been our cantaloupe vines. They were lush and lovely, but young fruit never seemed to set. A couple of weeks ago they suddenly turned sickly and never recovered. I pulled them out and took a sample to my local nursery, where they pronounced nematode infestation. Turns out there's not much you can do to stop these bacterial worms that turn your plants' roots knotty and stop water and nutrients from getting up the stem.

Too bad, because we had a lot of hopes pinned on those melons. We do have watermelons growing in another part of the yard, though. Just hope that's out of range of the nematodes.

Sunday, August 9, 2009

Fight the Fear

Ever get those chain-letter emails making some inflammatory, wild-eye claim about government, politics or pop culture?

Wait - why am I bothering to ask? Of course you have!

So, do you roll your eyes and click "delete"? I hope not.

There will always be some segment of the populace predisposed to believe in conspiracy theories and ridiculous rumors. I suspect it has something to do with genes or personality types, honestly.

But I think it is our responsibility not to just shrug and shake our heads when we get misinformation - particularly not during this time when fear-mongering seems to be reaching a peak (perhaps I should say "a nadir") in this country.

For example: I opened an email recently from a neighbor I've always liked. Our kids have grown up together and are good friends. She's a tireless community volunteer and her husband is a good guy involved in local politics.

So I was truly shocked to see that she'd forwarded me a wildly inaccurate chain email clearly designed to elicit panic in religious individuals. Worse, she'd included me in a long list of people who got the email, many of whom I recognize as active in our schools and community.

What to Do: There's a terrific web resource you should know about called Snopes.com. It investigates and debunks urban legends and email rumors.

It took me less than two minutes to find Snopes' take on the email my friend had sent - which was actually a compilation of two urban legends. Both were exhaustively and ruthlessly dismantled and ruled "FALSE" by Snopes.

Be Honest: I wrote back to my friend, hitting "reply all," and told the group about Snopes, including links to the pages that showed the material in the chain email was false. I was honest when I said I was disappointed that she'd pass on any chain letter (I hate the things) - let alone one so inflammatory - without checking on its accuracy.

I hope everyone makes it a point to be responsible, fair and accurate online. And don't just roll your eyes when you get bad information.

Friday, August 7, 2009

Social Media

Everyone knows a business that wants to stay successful needs to participate in social networking.

But exactly how are these multiple platforms best used? I answer that question from a small bakery owner in today's Smart Answers column.

Thursday, August 6, 2009

Entrepreneur Profile

It's the small business owner who's been pegged to lead the country out of recession.

How?

Conventional wisdom says that our salvation lies at the hands of the small-time inventor, the garage tinkerer who finds a way to make a new product cheaper, more efficiently and with better quality than his competitors.

I interview one of those small-time (and small-town) inventors in this week's Smart Answers column. Find out what really motivates him and how he plans to help save energy - and humanity.

This week's podcast features an interview with Steve Strauss, who says small business owners can do wonders with their companies if they will just get organized.

Tuesday, August 4, 2009

How-Tos and Whys of Business Plans

We talked this week about the importance of writing a business plan. But how is it done?

Writing a plan typically takes two weeks to several months. An average business plan runs about 40 pages, including financial statements.

If you're writing a business plan for internal use only, you can write a shorter, less comprehensive plan that runs 12 to 20 pages. Just don't skimp on the financials! That's the most important part when it comes to making your business plan use-able.

And you do want to make it use-able, and useful. It's crucial to not just write a business plan but to also use it!

Don’t write it and file it away. Write it and refer to it.

Do a quarterly budget analysis that compares projections with what has actually happened with your sales and expenses. You can then adjust your projections so they are more aligned with reality.

With this kind of “active plan” you will always be ready to go to a lender or an investor without feeling unsure of yourself or your future business. You’ll have the goods to back up your optimistic outlook for your firm.

Monday, August 3, 2009

You Need a Plan

Entrepreneurs often write me desperate to find out what's gone wrong with their companies. Many times the wrong turn was early on, when they blundered into business without making a plan.

Some companies hit on just the right product or service and find success, business plan or not. But generally, operating a business without a business plan is a mistake. A business plan gives you a blueprint to follow during the life of your business. If you update it frequently, it will tell you when, where and how to implement changes that will make your business more profitable.

Most successful businesses have a business plan, and one is imperative if you plan to raise capital or borrow money from an institutional lender. Investors require a business plan before they will even consider investing in your business. No plan, no capital.

A business plan should contain three basic sections: Administrative, marketing and financial. You should write a business plan when you first consider starting a business.

If you have done things backwards, as many small business owners do, don’t fret. It is never too late to write a business plan. Don’t let someone else do it; write it yourself. Only you truly know your business. Also, by sitting down and writing the plan you will gain more insight into your own business and become a more effective leader.

If your company is already up and running, solicit input on the plan from your key managers and employees. Make sure that you integrate their thoughts into a comprehensive plan with continuity and coordination.

Still feeling inadequate? Take a business plan writing class through your local university or community college's entrepreneurial center. You’ll find additional resources at the library, bookstore or online, including step-by-step books on how to plan a business and sample business plans for various industries.

For $200 (cheaper if you download the eBook), you can purchase Thomson Gale’s “Business Plans Handbook,” which includes 24 sample plans taken from businesses in the manufacturing, retail and service industries.

Sunday, August 2, 2009

Business Advice

My most recent Smart Answers columns touch on a couple of salient issues:

How small business owners are faring in the competition for federal stimulus money and how to market a new stuffed animal.

I got some good advice from my experts on both topics, if I do say so myself. Check them out!