A small retail business in my community recently shuttered its doors when one of the partners was unexpectedly killed in an automobile accident. Even though the 25-year-old company had survived numerous economic recessions and changes in healthcare regulation, when the owner passed, the bank required the payment of the company’s outstanding bank debt, and the company was forced to dissolve.
Hundreds of businesses are affected every day by the unexpected death or disability of a key employee, manager, or owner. In the best cases, the business has prepared for the event and the consequences are not catastrophic. However, for most companies, the loss of a key stakeholder has a devastating effect and can result in layoffs, bankruptcy, or even complete failure. Fortunately, such outcomes can be avoided by the prudent purchase of insurance on “key” members of the business enterprise.
This article first appeared on ezine.com on February 29, 2012.
In a world of instant communication, world-wide sourcing, and sophisticated marketing programs, the only sustainable competitive advantage is Customer Loyalty. Small business owners often overlook the obvious in pursuit of the difficult – it is far easier to retain a customer and get a new order than to find a new customer. Satisfied customers return again and again to the businesses they trust and often bring new prospects with them. A few good words of recommendation are more valuable in building a business than expensive sales campaigns and discount programs.
Consider your own experiences as a consumer. Where do you shop for groceries, medicines, or clothes? Where do you buy gas and get your vehicles serviced? If you’re like most people, you patronize a limited number of establishments with whom you are comfortable and trust, even though virtually everything you purchase can be bought from someone else for the same or lower prices.
Where do you fill drug prescriptions? A third of Americans shop at either a CVS or a Walgreens located within 5 miles of their homes. Often the two competitors are located across the street from each other. They carry the same goods and products and participate in the same health insurance plans. They are virtually identical in appearance and layout. Aside from periodic discounts on specific products, their prices are almost the same, varying by pennies if at all. But the odds are that you give most of your business to one or the other, rarely entering the doors of the other company’s store. Why? And why do your neighbors follow similar behaviour?
People purchase products and services from companies who continually meet or exceed their expectations, whatever they may be. Most people expect, at a minimum, that the products they purchase will work as advertised, the product will be available when they want or need it, and the price paid for that product is fair. They want convenience, consistency, and a lack of complication in the process. In short, they want to be comfortable that they are getting what they expect when they pay for a product or service, nothing more and nothing less. The business owner who understands this desire has an opportunity to create a extraordinary experience, exceeding basic expectations, and convert a skeptical buyer into an enthusiastic promoter of the business who repeatedly returns and brings his friends.
While attending college in the mid-1960s, I had the opportunity to work at one of Jack Brown’s One-Hour Martinizing Cleaners in Austin, Texas. The University of Texas at that time was one of the largest colleges in the United States, starting 15,000 new freshmen every year. Mr. Brown focused on those new freshmen, knowing that if he could get them as customers their first year, they would remain customers for their college term.
There are a lot of dry cleaners and laundries around every college campus. Clean, pressed clothes are important when you lead an active social life. Most freshmen, living away from home, send out their clothes for cleaning. At the same time, they are strangers in a strange place, knowing no one and feeling insecure about being on their own for the first time.
Mr. Brown understood their situation and recognized their loneliness, particularly the first semester. As a consequence, he had one rule for any employee who worked on the front counter – he expected every customer to be greeted by his first name by the customer’s third visit to the store. Imagine how that lonely freshman felt when he was greeted by a friendly voice calling him by his first name! No one else knew his name, not the teachers who handled classes of 50 students or more, the dining hall stewards or fast food counter people, not even the people in his dorm of 500 or more. He came to the cleaners with the expectation that his shirts would be washed at a reasonable price; he kept coming over the next 3 and ½ years because he found a friend who knew him by name, something he never expected from a local dry cleaner.
Being able to recall and use someone’s first name is not always the reason someone returns to a business, but it can’t hurt. Clean facilities and equipment, courteous employees, stocked shelves, quick deliveries or installations, listening and responding to your customer’s concerns are all part of the customer experience as well as other things.
To determine how you can make a fabulous impression in your business, you need to put yourself in a customer’s shoes. Try to review every aspect of a transaction from his viewpoint, no matter how small or trivial the point. How does your phone system work? Is it easy to get caught in a transfer Hell where talking to a real person is impossible? Are the features of your products or services easily understood? Is your billing excessively complicated for your purposes, not those of your customers? Do you follow up with a customer to see if the product is performing as promised? Think about it and write out your customers and answers for reflection and to find opportunities for improvement.
Ask a friend to go through a customer process with your company and get this thoughts. Better yet, call some recent customers and get their feedback on what they experienced. Don’t settle for vague answers! Ask specific questions about what they expected and what they got. Ask them for suggestions to improve your process before their next visit. Incidentally, calling a customer and asking him for his thoughts will make him feel important and that you care about him – a good outcome by itself.
Have you come to any conclusions about why you continue to visit the same stores? Do your customers feel about you the way you feel about those businesses? How can you improve the experience for your customers?
Many small businessmen overlook the value of key advisers in the establishment and/or operation of their business believing that they can rely on public sources, trusted friends, or their own experience to handle any likely problems that may arise. After all, third-party experts can be expensive and it is sometimes difficult to see the benefit they bring to the table. If you’re a small business owner, I may be “preaching to the choir”. If you’re currently thinking of starting a small business, please seriously consider my advice because it might save you countless headaches and stress in the future. Having managed companies for more than 40 years, I would recommend, without qualification, that every businessman needs ready access to:
A Certified Public Accountant (“CPA”)
Many people confuse a book-keeper with a CPA, but they are not the same. The latter requires a college degree, years of apprenticeship under a practicing CPA, successful completion of a rigorous examination, and licensing requirements in each state in which the CPA will work. A CPA is usually paid an hourly fee for his services.
A good accounting and management reporting system begins with the creation of the Chart of Accounts that is appropriate to each business; the list of accounts being not so complex as to generate reams of useless data, nor so simple that key relationships are missed. Creating and maintaining an appropriate Chart of Accounts is essential in the production of concise, correct, understandable financial statements and management reports. There is nothing more frustrating than working in a turn-around situation with unreliable numbers!
By training and periodically auditing my employees’ work, my CPA gave me the comfort that nothing was amiss in the financial records. I enjoyed the best of both worlds – timely, accurate books and reasonable costs. My CPA saved me money in my business as well as on a personal level. For example, Federal, state and local governments often regulate aspects of a business and require regular reports with draconian penalties when filings are late or incorrect. Taxes – employee withholding, FICA, income, property, etc. – are significant costs of every business and require specific treatment to minimize their impact. In addition, the decisions on every day business transactions affecting purchasing, inventory, purchase and sale of machinery, etc. are increasingly complex and obtuse, but directly affect how much profit you will have at the end of the day. A good CPA will help you make better decisions that fit your unique company and circumstance, whether you’re just starting out or ready to retire.
A Licensed Attorney at Law
According to Legal Reform Now, an organization dedicated to progressive reform of the legal system, over 15 million lawsuits – one every 2 seconds or one for every 12 adults – was filed in the United States in 2002, the last year for which such information is available. Law Department Management states that there are over one million lawyers in the United States, each of which manages 20 to 40 lawsuits at a time. The likelihood that you as a small business owner will be sued or will sue a third-party is extremely high. For that reason, you should have a close, personal relationship with an attorney and his number on your speed dial.
The primary reason I work with a lawyer when setting up a company and in its subsequent day-to-day operation is simple – I need legal counsel to protect me, my company and my employees from future unknown and unexpected liabilities. The type of business structure of a company, whether a sole proprietorship, a partnership or a simple corporation, can determine whether or not personal assets are at risk, the ability to attract investment capital or loans, and the amounts of any tax which might become due. A lawyer’s advice concerning potential patents, trademarks, or copyrights as valuable assets may be critical in protecting value, just as is employment contract language and requirements which can determine who can hired or fired.
Virtually every phase of a business operation has legal implications. Establishing an employee benefit plan, whether a pension or a profit-sharing plan, imposes future actions which can be costly and inconvenient. Adding or buying out a partner often requires compliance with a pre-determined procedure and a pricing mechanism. Contracts with vendors as well as contracts with customers need periodic reviews to ensure continued compliance with trade regulations and laws which can alter, even abrogate, language within specific contracts.
Of course, an attorney is essential in a law suit. Lengthy, complex court papers must be filed within strict timelines to ensure matters progress as expected. The consequences of possible outcomes, good and bad, must be assessed and valued in order to make key decisions whether to negotiate and settle or proceed to trial. Even after a judgement has ben rendered, the process continues as the case can usually be appealed.
My attorney, who has handled my personal and business affairs for more than 30 years, is a key member of my business advisers. He becomes a “Superman” when I’m in the midst of any legal troubles.
A Trusted Coach/Consultant
Owning and running a small business is undoubtedly one of the most difficult, most demanding position in the business world. According to the Small Business Administration, approximately one quarter of new companies remain in business after ten years; more than 25% fail in the first year. Imagine starting a business at age 45, risking all of your savings and depending upon the success of the business to pay your living expenses, only to have to start over again in your mid-50s!
Success is never guaranteed since all businesses are vulnerable to threats that cannot be foreseen or controlled – a new competitor, a loss of a critical supplier, the introduction of technology which makes your products or services obsolete, etc. A small business owner certainly earns every good thing that comes his way because he has generally paid a high emotional, social and familial price for any success.
“Change” and our reaction to it is the ultimate cause of stress, according to the psychologists. A small business is particularly impacted by change, lacking the resources to blunt or delay its impact. As a consequence, decisions must be made rapidly, most often without the benefit of complete or reliable information. In effect, the business owner has to fly by the seat of his pants, trusting his experience and intuition that his decisions are more right than wrong. A good friend of mine who owns a local trucking company often says he feels “like he is throwing darts”.
The pressure of being the person in charge who is not really “in control” of the outcome can wreak havoc on the strongest personality, causing depression, family problems and/or substance abuse. When I’ve been under stress, I have found the best course for me is to take a break, get a breath, and talk over the situation with a trusted, experienced counselor.
A coach should understands you and sympathize with your position, hopefully having sat in the same seat as a CEO and small business owner. A good coach will recognize that pouring out your anger and frustrations is a coping mechanism, not a signal that you are giving up or admitting defeat, but a necessary phase in which you can safely engage privately without harming the morale of your employees. When you are ready, the coach will help you logically and dispassionately dissect the problem and examine it from every angle to be sure you understand its causes and effects as much as possible before making a decision on how to correct it.
A coach should rarely brings answers to your discussions, relying instead upon questions and stories of his experiences when facing a similar circumstance. He will encourage and enable you to develop your own solutions, to think critically without the disadvantages of biases, misinformation, and half-truths. By helping you to “listen and trust yourself”, he will give you the confidence to take responsibility and make hard decisions. In short, he should make you a better manager and leader, able to cope with everyday change and stress.
Final Word
Small business owners need the right resources to succeed. Competent accountants, attorneys, and coaches are critical resources and often make the difference between success and failure.
This article first appeared on the shopify.com blog on July 30, 2013.
Despite the rise of the lean startup, crowdfunding sites and inexpensive software, there are still many business that never get off the ground simply because they lack sufficient capital.
Saving money and generating capital to start a business is tough and we’ve all heard stories about famous entrepreneurs working out of their bedrooms and barely scraping by when they were just getting started.
That’s why being frugal and spending money prudently from the outset makes considerable sense for the following reasons:
Rational spending inculcates a culture of disciplined thrift and investment. Examining each expense to ensure the greatest possible value for each dollar maximizes and justifies your entrepreneurial capital.
Few companies are able to rely exclusively on internally generated funds (revenues and/or profits alone) during the initial stages to build a base for sustainable long-term growth. Investment in the form of loans or equity is invariably required, a process that inevitably dilutes the founder’s ownership and control.
Extending the period between start-up and the need for additional capital infusions to later stages of the growth curve tends to expand the pool of competing entities which may invest, and is generally reflected in a lower cost of capital, either in the form of lower interest rates or higher entrepreneurial retained equity.
Delaying the need for outside capital until proof of concept, quantification of potential revenues, and/or achieving some level of profitability improves your negotiating position with potential investors. Simply stated, reducing expense maximizes cash flow, which reduces the level of revenues necessary to achieve break even, and increases profits.
Founders of companies that survive the start-up phase are likely to find their roles, authority, and return reduced as control of their companies is transferred to those who subsequently finance later stages of the company’s growth. The reality is that postponing the need for outside capital until strategically necessary is always good advice.
Notices of New ContentSign up for automatic notices when Content changes
If you are interested in seeing additional posts, articles, or books as they are published, please join our email list. Your name and email will be secure and never available to any other party. You will never be asked for confidential information or solicited to purchase anything from this site.
You will never be asked to provide your Social Security number, Credit Card details, or Passwords.
A small retail business in my community recently shuttered its doors when one of the partners was unexpectedly killed in an automobile accident. Even though the 25-year-old company had survived numerous economic recessions and changes in healthcare regulation, when the owner passed, the bank required the payment of the company’s outstanding bank debt, and the company was forced to dissolve.
