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Small Business

What’s The Key Issue Facing Small Business? Access To Capital

Cash-flow issues continue to plague America’s small businesses, according to a survey of 300 members of the National Small Business Association.

Forty-three percent of small-business owners reported being shut out of funding during the past four years and nearly one-third had to reduce payroll.

We have seen this pattern in survey after survey. While access to capital has always been a challenge for small businesses, the “great” recession has made it more difficult than ever for small businesses to gain access to the capital they need.

In our work, we have found that the small business community includes 6 million small employers with 43 million employees.

Small business owners want to create jobs, innovate and grow the economy. Improving their access to capital will be a key to increasing employment growth in the U.S.

What Motivates Employees? How Do You Get The Most Out of Your Staff?

One of the key challenges for any executive or business owner is motivating workers.

To help you get the most out from your employees, I’ve compiled a list of best practices that can help you turn your staff into motivated and loyal employees. Research has shown that these are the items valued by employees in high performing and growing organizations.

  • Communicate a clear and compelling vision of where the organization is headed, how to get there, and what it means for your people

  • Articulate a clear direction and strategy for winning, and translate it into specific goals and targets

  • Talk to your employees and discuss the direction of the organization and their part in making it happen

  • Ensure individual employees understand what is expected of them, have sufficient authority and feel accountable for delivering results 

To develop employee loyalty and enthusiasm, you need to motivate your team to perform at their very best. In survey after survey, we have found that strong scores on these items indicate highly performing organizations with enthusiastic and loyal employees.  

Customers’ Online Feedback: What to look for

Over at Entrepreneur Online, social media consultant Mikal Belicove offers some reasons why businesses need to pay to attention to customer feedback. Belicove’s tips are based on research conducted by Bazaarvoice, a Texas-based company best known for its ratings and software reviews.

Nobody can deny the importance of monitoring customer feedback. It is absolutely critical. So what do you look for when you are reviewing online comments for your business? Here are few questions that you need to answer as you look at the feedback:

  • Where are you under-performing in the eyes of customers? 

  • What issues need to be addressed in your product, service or with your staff?

  • Do customers consistently mention a particular attribute of your business as very important?

Your goal should be to understand the aspects of your customers’ experience that drives satisfaction and ensure that you consistently deliver on those items. Take those aspects where you excel and include them in your communications with customers to reinforce your commitment to satisfying the items that they deem important. Together, these simple steps can help you build a loyal customer base.  

Understanding Small Business Confidence, Consumer Confidence and the Impact of the 2012 Elections on the Economy

Plus Some Tips on Selling To Small Businesses

In a previous post, I talked about the weakness in consumer confidence and its value as a gauge of the economy. In short, weakness in consumer confidence is more a function of the political climate and lack of faith in political leadership rather than a barometer on the current state of the economy.

The same can be said for small business confidence.

Yesterday, the National Federation of Independent Business (NFIB) released their latest issue of the NFIB Small Business Economic Trends including their Index of Small Business Optimism.

The index of small-business optimism rose 1.3 points, nudging the index up to 90.2. This was below the year-to-date average of 91.1 and only slightly better than the average since January 2009. It should be noted that the report is not a random sampling of business owners. The report is based on the responses of 2,077 randomly sampled small businesses in NFIB's membership. So, the results reflect the views of their membership of business owners which is dominated by smaller brick and mortar businesses. Despite that huge caveat, it is widely used in the business press as an indicator of the health of small business in the US.

NFIB’s index typically mirrors consumer confidence. As you can see below, there is a strong positive relationship between NFIB’s Small Business Optimism and the University of Michigan’s Consumer Sentiment Index. I also included the PMI or Purchasing Managers Index from the Institute for Supply Management to illustrate an indicator that does not have as strong a relationship to small business optimism.

Here’s a tip for marketers to small businesses.

Small business owners are people too. Their impressions of the economy strongly resemble the views of the overall public as illustrated in the above chart. You’re not selling to a business, you are selling to an individual whose income is directly tied to their business and not an employer (i.e. they “eat what they kill.”) Their view of the economy and their future prospects are more closely allied to the views of the overall public and will dictate how they will spend, invest, and grow their business.

As you can see in the above chart, the sentiment of purchasing managers does not have as strong a relationship to the small business index, and the factors purchasing managers use to make purchasing decisions and to assess the state of the economy are very different from those of your typical small business. Right now, corporate earnings continue to grow and corporate purchasing has been rather resilient. Conversely, personal income among consumers and the revenue of small business owners continues to be challenging and a drag to the economy.

Remember, selling to small business owners is a lot like selling to consumers, both respond to messages that will save them time and money. And for small business owners, you can also add in the message of more revenue.

The overall confidence of small business owners and the prospects of selling to them will improve when the overall sentiment of the economy improves, and this is directly tied to both groups’ faith in the political leaders who shape economic policy. If people believe that political leaders are incompetent, this will lead to a lack of confidence in the economy.

And based on the current numbers from the Pew Research Center for the People & the Press, the public’s confidence in congressional leaders and the President remains rather low. With the coming budget battles over the next few weeks, I doubt that we will see much improvement in either of these indexes.

When the public’s confidence in their political leadership improves, you will begin to see some improvement in consumer sentiment, small business sentiment and small business employment.

As we get closer to next year’s elections and the prospect of changing the political landscape in Washington becomes more of a reality, we should start to see some improvement in consumers and business owners’ confidence in the economy and their political leadership. With that improvement, we should see a stronger uptick in the economy and stronger growth in the second half of 2012.

Until then… expect a bumpy ride.

What Business Owners Can Learn From J. K. Rowling

American Express’s Open Forum blog uses J.K. Rowling as guide for five invaluable tips for entrepreneurs. This is a great list that all business owners and startups should keep in mind:

Tip 1: Don’t rush to roll out your product

Tip 2: When a great idea grabs you, grab back

Tip 3: Persevere, persevere and persevere

Tip 4: Don’t let anyone sidetrack you from your goal

Tip 5: Each of us has a unique contribution to make to the world

Narrow your target market and differentiate your business for success

Specialization is key to small-business success, writes Rhonda Abrams in USA Today, who advocates choosing a specific customer niche to narrow your target market and make the most of your resources. She gives six ways to narrow your market by segments that include geography, industry, demographics work specialty, unique knowledge and style.

To me the two most important items are work specialty and unique knowledge. As it becomes increasingly easier to source specialists from around the world at ever diminishing costs, it is important for businesses to strongly differentiate the products and services. The more unique or specialized the skill or service, the greater opportunity to maximize revenue and build pricing power.

Tips on Starting a New Business Courtesy of "Mad Men"

Season four of the hit TV series "Mad Men" sees the opening of a startup ad agency. Rhonda Abrams in USA Today offers up some great points on what the founders of Sterling, Cooper, Draper, and Pryce—and new business owners like them—did well, and where they need to improve.

Here are a few key takeaways all new entrepreneurs should remember:

  • Pull together a team. You can’t do it all. They can't. You can't. Find people who balance your weaknesses.
  • Take chances.  Come up with fresh approaches and new thinking to differentiate company.
  • To quote John Wooden, “be quick but don’t hurry.” You have to make quick decisions. When opportunity arises to start the new agency, the principals didn't dawdle. They pulled the trigger and worked nonstop day and night to make sure they got the launch right.
  • Be flexible. They understood that they might have to expand or shrink staff quickly to meet their needs.
  • Be frugal. While they did a mixed job on this aspect of the launch, they didn’t spend the money on an expensive conference table. Remember, frugal is the new cool. Especially among startups.

Brother Can You Spare Loan

As banks continue to tighten lending, many small businesses are turning to microlenders, which grant loans averaging about $10,000. According to The Washington Post, small businesses also are increasingly looking to Internet-based peer-to-peer lenders to meet their capital requirements.

Starting a business right now is difficult, but not impossible. Financing is one of the major roadblocks which is forcing many new entrepreneurs to bootstrap or use plastic. Once the banks are allowed to start lending, new business activity should begin to grow.

Interest Free? No Thanks

President Barack Obama's proposal to increase small-business lending is "an interesting idea" but does not take into account signs that small businesses do not want to increase their debt, Catherine Rampell writes. "Just increasing the supply of credit available to businesses won't be enough to jump start lending. Businesses have to want that credit, too," Rampell writes.

Having recently completed a series of focus groups with small business owners, I can attest that this is very true. Most businesses are looking for payback in 18 months or less and do not want any long term debt obligations regardless of the attractiveness of the offer.

The Enthusiastic Business Owner

USA TODAY is launching a six-month series that will follow the progress of several entrepreneurs who are starting new businesses. Experts say the entrepreneurs behind the wine business, peanut sellers, home inspector, Botox provider and high-end property rental firm that were selected from among 1,800 applicants to the Small Business Challenge have one thing in common: enthusiasm.

If you want to be a successful business owner, enthusiasm is a must. I would also add patience, a thick skin, and determination as a few other necessities.

Sun Belt Small Business Growth

According to a new study from Portfolio.com and American City Business Journals, Austin Texas is the best metropolitan area in the U.S. for starting a small business. The city's population growth, employment rate and burgeoning small-business growth helped it earn the No. 1 spot. It was followed by Baton Rouge, La., Raleigh, N.C., Charleston, S.C., and Portland, Maine.

Last place… Detroit.

Sad to see that my hometown of Nashville came in at #28, but that is an improvement over last year’s ranking of 33.

Eating What You Kill

Chris Brogan, president of New Marketing Labs and the co-author of Trust Agents, offers up some great advice for new business owners.

  • Focus on what you need to drive the business, not the “trappings” of a company.
  • Keep your metrics simple, and focus on value.
  • Use sweat instead of credit.

In business for just one year, New Marketing Labs is not only profitable, they are growing. These three key are definitely part of their winning formula. For me, working within your means and staying very lean are keys for success.  It’s nice to see that others agree.

Give Them What They Want

"Deceptively simple" but astute advice to small-business owners from USA TODAY columnist Steve Strauss: Ask customers what they want and then give it to them. There are lots of ways to solicit customer opinions, Strauss writes, including one-to-one chats, questionnaires and telemarketing.

Asking them what they want is deceptively simple. Believing what they tell you… that can be difficult. It is always easier to attack the message or the messenger than to own up to your customers opinion of your products and service. Don’t blame the messenger. Own your customer’s thoughts on your products and service. Those comments may be the spark that leads to increased customer retention, improved sales and the development of new products.  Don’t just ask, learn from your customers and your bottom-line will thank you.

Do You Know What’s Around The Corner?

"Regardless of how you go about innovating, make sure you're continually pursuing the next thing, because a company's commitment to staying relevant must never cease," writes Steve McKee, president of McKee Wallwork Cleveland Advertising.

As McKee notes in the article, you must understand how customers view and interact with your brand or service to understand what’s next for your business. And knowing what’s next is the only way you can stay ahead of the competition.

Customers and markets are always changing and staying ahead of the curve is imperative if you want to stay in business.

Many businesses start out as innovators, win awards, and over time fall behind.

Just like mutual funds, past performance does not guarantee future results. Even if you have customers tied up in long term contracts, you will eventually have to convince them to renew. Will you have something new and innovative to share or will you be relying on your previous service and relationship?

Continually innovating and growing will not only keep a business relevant; it will also give customers another reason to stay.

Saying Goodbye Is Never Easy, But It Can Be Profitable

Letting someone go is one of the most dreaded and difficult tasks that a small business owner will encounter.

Firing a customer is doubly difficult.

In this tough market, many small businesses are cutting loose demanding, resource-draining customers who want deep discounts or pay their bills late.

Dropping these "high-maintenance" clients reduces frustration and allows entrepreneurs to devote their time to more profitable clients.

So how do you know if you need to fire a customer?

If you have customers that don't get the value that you are adding, don't appreciate your service, or have unreasonable demands, you should think long and hard about continuing the relationship. 

Not only do these types of customers eat up a lot of time, they do not create any positive word of mouth for your business. They also frustrate your staff. By forcing your employees to deal with these people, you are sending them a message that their professionalism, values or sense of quality don’t matter.

Letting a customer go is never easy, but sometimes it just has to be done.

On Demand (Free Agent Society)

Face it, we are all free agents.

iTunes and iPods forever changed the music industry. You can use Shazam to recognize a song playing on XM in a restaurant and download it immediately.

We can go to Hulu and watch 30 Rock or Family Guy whenever we want.

We can download movies to our DVR from Direct TV anytime we desire.

Thanks to the Kindle, books are now on-demand and Apple’s tablet PC will only fuel the market for digital readers and book downloads.

And now, like Major League Baseball players, workers are now realizing that they too are free agents and on-demand.

The New York Times small business blog offers up some great advice on managing a career. In short, manage it like a small business. With so many people unemployed or fearful of being laid off, human resources experts are recommending that workers think of their careers as small businesses because the market for temporary and contract work has picked up.

Social-networking sites, "cloud computing" and mobile communications likely will produce a "surge of entrepreneurs," says Jim Jonassen, head of Jim Jonassen & Associates Venture Search.

Just like a baseball team in need of a left-handed hitter who can hit with power, employers in need of PHP programmer with banking experience or a sales team that needs a specialist in selling to government agencies are signing players who fit their needs for a finite amount of time and just when they need it.

In the new world order, growing and cultivating employees for the long-term is going the way of AOL. Developing your personal brand and product, is now the new norm.

For baseball players, salaries and revenues exploded especially for those with exceptional or specialized talents. The new job market along with everything we buy or consume is quickly becoming on-demand and at the whim of buyer.

It will be interesting to see if salaries increase and how much movement occurs as the economy improves. I’m betting it will for workers who find their niche and realize their true value.

Fighting The Resistance & Fulfilling Your Dreams

A would-be entrepreneur whose family and friends are not supportive of her plans to open a consignment shop should stop talking about it to them, writes USA TODAY columnist Gladys Edmunds. Unless the naysayers have succeeded in the same kind of endeavor, the negative energy is not helpful, she says.

One of the best books on this subject is The War of Art: Winning the Inner Creative Battle by Novelist Steven Pressfield (The Legend of Bagger Vance; Gates of Fire). The book aims to help readers "overcome Resistance" so that they may achieve "the unlived life within." Whether one wishes to embark on a diet, a program of spiritual advancement or an entrepreneurial venture, Pressfield says that it's most often resistance that blocks the way. To kick resistance, Pressfield stresses loving what one does, having patience and acting in the face of fear.

He also talks about ignoring the nattering nabobs of negativism and fighting the resistance within and that surrounds you. For those thinking of starting a small business, I can’t think of a better book to read.

Keeping The Dream Alive

Great story of a quality product and persistence. Greg Snell developed the Winepod, a $4,500 contraption for making wine at home, which seemed like an idea full of promise just a few years ago in a very different economy. But then the recession hit, venture capitalists backed away and entrepreneur Greg Snell had to lay off all his employees and move the business into his home. It was a rude awakening for a company that once boasted $4 million in funding, but Snell expresses confidence that a less-than-$500 version, due out next summer, will keep the dream alive. CNNMoney.com

Some of the greatest qualities of entrepreneurs is self-confidence, determination and a belief in what they do. I have no doubt that one day; I will be buying a Winepod. It does illustrate the need for researching your market and preparing for storm clouds. In a great economy, $4,000 for a higher end market probably seemed achievable. In this market, a $500 price point and quality that is “good enough” will probably keep the dream alive.

Making Your Own Way To Happiness

Self-employed business and factory owners scored the highest in the most recent Gallup-Healthways Well-Being Index, a statistic that has psychologists touting the significance of personal freedom at work, control of time and ability to respond to hardships like the recession.

Seeking out enjoyable work and finding a way to do it on your own terms, with some control over both the process and the outcome, is essential to fuel satisfaction and contentment. This is one of the main drivers for entrepreneurs and business owners.

Now more than ever, this a lesson employers need to take into account.  With layoffs and longer hours, it is important for employers to take heed of these lessons and find ways to give their employees some sense of control. Next year, the employment situation will improve and your employees will be seeking these types of opportunities.

Preparing now to hold on to your talent would be a very wise move. They will remember how you treated them during the rough times.

Recharge, Reassess and Prioritize

It is true that entrepreneurs, freelancers and other self-employed professionals struggle to take vacations or time off. I have done numerous studies that prove what we all know: yes, business owners have trouble turning off and checking out from work.

Now that I’m part of this group, I can personally attest to the difficulty of turning off the business side of my brain and not thinking about business. Last week I actually took some time off and tried to check out. There were some business issues that needed to be addressed and most were easily remedied.

Since I was not able to totally check out, I did the next best thing. I used the time to “Blue Sky” some ideas and with a very relaxed brain prioritize the things that were important and needed to be addressed now.

It is important to recharge, reassess and determine your path for next six months. Hopefully, I did that last week.