Business Owners – Business Failure (or Success) During a Recession is Not Due to the Economy

Are you a business owner struggling with your business and blaming it on the economy? It’s not the fault of the economy.

Business success or failure is due to the owner’s decision making process, not the economy. Why?

As a business coach I get to see what’s happening in a lot of businesses, and I see that, frequently business owners, who have been making poor decisions during a good economy, just make worse decisions during a bad economy. In fact, the outcome, good or bad, just gets multiplied.

The belief that the economy will cause pain usually results in the fact that it does, not because of the economy but because of the decisions that were made because of the expectation that things are going to get tough. The already bad decision making, is just amplified by the owner himself as he “expects” worse things to happen.

Here are just a few of the poor decisions.

Most people believe that they have to live within a budget, and the way to do that is to cut costs to the bone.

Business decisions based on “cutting costs” usually cut critically needed things instead of looking on the RIGHT things to spend on that would increase the income and profits at this critical time.

For instance, I ask my coaching clients a series of questions that almost always get answered wrong.

What would you do the first time that your sales doesn’t pay your overhead expenses?

For a small business the usual way of dealing with this means that you “pay the overhead” and take the difference out of your pocket, or you just “don’t pay the overhead” and fear that the landlord will be knocking. The next steps that are usually taken are to reduce spending on things like marketing (while justifying that action with a statement, “it didn’t really work that well anyway.”)

However, the RIGHT answer was to identify what was the biggest return for which type of marketing, and how to increase the results of that marketing. Of course that question should have been asked before you were in this situation, but now that you are it MUST be answered NOW, and not where can you cut. Cutting typically takes out just a few dollars, while finding what marketing and other items to invest in usually can make 10′s, or 100′s of times increase. Get the point?

Actually, doing this before you are in this economy would have meant that you wouldn’t be struggling now, but, since you are, we stil must deal with it right now.

Always consider that your business is a MULTIPLIER and not an EXPENSE that needs to be fed.

I’m not saying that there aren’t businesses that are sponges, absorbing money out of your pocket, there are. But, as I’ve worked with lots of businesses, I usually see business owners with businesses that have a nice multiplying effect make the same false assumptions that they have to cut back and stop spending on the multipliers, causing a loss of 10 times what they saved.

Let’s take a look at a decision that most business owners make about the economy.

One of my clients is a small manufacturing company, does about $200K in sales a year, but rarely had a significant profit at the end of the year even in a good economy. But, as the economy started sliding they went from just barely able to pay the bills to not being able to pay the bills.

The next steps they took were to

  1. Reduce marketing efforts
  2. Lay off employees

The two worst WRONG things to do.

Frequently business owners make decisions based on THE BOTTOM line, not realizing where the multipliers are in the business. So instead of doing what would increase the income, they start cutting out things, thinking that they will remove enough to at least break even.

So, when the bottom line is zero or negative, they started looking for places to cut instead of places to increase the bottom line. When I started talking about profit margins and got blank stares I could tell they didn’t get it. After a little reviewing, we finally came to the conclusion that they made 60% on every dollar sold, which is a more than respectable profit margin. So they were baffled as to why they were losing money.

They sold $200K a year, and made $120K (60%) in profit. When we dug even deeper, it was obvious. They had an overhead of $120K, which ate up their whole yearly profit. Now when the economy started sliding their sales dropped below $200K to about $190K which wasn’t really that bad of a drop, but now there isn’t enough to pay the overhead.

So, their next decision was not only cutting out expenses, it was literally cutting the throat of he business.

I’ve discovered, with all of the businesses I’ve worked with, that this seems to be a normal thought process among most businesses. “Where do I cut?” is one of those “shoot yourself in the foot” decisions that is rampant among small business owners. It’s something we were taught to do as kids. Living within a budget meant that we had to stop spending, not finding ways to generate more.

As we went looked at this business, it was obvious that they made 20 times what they invested in marketing as sales. They are a very profitable business when you look at it this way. So, cutting $1 out of marketing would remove $20 from the bottom line. Not a good decision, but a very typical one.

Of course, another decision usually made shortly after this one is, “Who do we let go?” Just keep in mind that employees are the ones who deliver the product that’s sold for 20 times what you invest in marketing. Employees also have a multiplying effect on your business, or they should be anyway. So, cutting them could have a similar impact.

With a 20 times multiplier from marketing to sales, what do you THINK you should have done?

Increase marketing of course? Put money where your results are.

If you looked into who survived the Great Depression in the 30′s, who do you think survived? Those cutting back, or those spending more on marketing?

Of course, you MUST know what marketing is working and what the multipliers are so that you can invest in the right ones.

Part 1 – Aged Or Seasoned Corps – Build Your Business Credit – Obtain 2-500,000 USD Or More

Is it possible to build hundreds of thousands of dollars in credit for your business? Have you heard the horrible stories of friends or other owners that have lost thousands of dollars trying to build corporate financing using Credit?

“Knowledge is Power” The answer is yes you can build or borrow thousands and millions of dollars if you know the recipe for building credit. The problem with this method of financing has been lack of available information or knowledge about the subject.

As a former Dun & Bradstreet Senior analyst, my job was collecting information from owners to build a business profile and credit report, if profiles monitored and prepared properly the owner should benefit greatly with future possibilities, if prepared incorrectly the business owners would possible struggle to establish venders and lenders outside of their local markets. Dun & Bradstreet and the owner benefits by having a complete business report.

Here is the big secret! – In order to have a chance with building corporate credit – You must own an business that is registered as a corporation or LLC with the Sec of State. The company should have an established EIN number. an office, a business phone number listed with 411 directory and of course a duns number and credit profile. Once you have completed the business foundation you business is ready to add vender trade lines, loans and/or Credit Cards.

There is a process to building business credit for your corporation as follows.

Step 1 – Corporate Structure must be built on a solid foundation with the Secretary of State using the company EIN for starters.

Step 2 – Applying for Business credit! No short cuts – Period. For those who do not know the recipe the business credit opportunities are limited.

STEP ONE
This process of building the corporate foundation can be time consuming but very well worth the effort. If time is important look for a good corporate credit eBook or find a qualified business financing expert to build the foundation for you first before trying to obtain business credit on your own. Those that understand the corporate building process will save you time and money to build the foundation you need to grow, otherwise it could set you back several months trying to correct mistakes. Take your time and create a plan of action. If you do not have the time have someone in your office to monitor the program to meet your credit goals.

Building the corporate foundation first is essential when securing vender trade accounts and unsecured larger lender loans. If your company is new, it is consider a new company and will take a couple of years to build the proper business history, trade lines and credit to meet most vender credit requirements. Assuming you added a corporate credit building program to your new business over the first couple of years then you are well a heard of the game and now the company is ready to start looking for additional financing to grow your business. Congratulations on your success …

Like most business owners, entrepreneurs and those starting a company for the first time, the last thing on your mind is more paper work much less thing about a long range goal of preparing your business for future financing.

The chances are you did not know you could build or establish a 1-2 year corporate credit plan to grow your business if times were financially tough. Most of us think that were are going to make lots of money after we get started, however, you did not considered the fact of what happens if it really does start making a ton of money and you need more funds to cover inventory or supplies, or maybe you need to hire more employees but strapped for cash. Maybe short on cash to cover employee payrolls because the accounts receivable was slow to arrive. Checks in the mail. Never the less it is always good to plan for the rainy day when starting a business you can never have enough cash available.

Do yourself a favor, make a business credit plan and stick to the plan, when the time comes you will be much more prepared.

Here is the good news, you can start building your copporate credit and long term financing goals at any time. However you must start with a solid foundation.

Many people come to me asking for assistance with company financing or corporate credit. The first thing I ask ,besides the courteous introduction; What is your personal credit scores? What is your company Duns number and Paydex score? I would bet you a dollar to a donut that 9 out of 10 responses are “I have no clue” but they know they have one.

Should they have the right answers, then the next series of questions are about the corporation foundation, like where are they located? Do you work from home or an office? Do you have a business telephone in the name of the company listed with 411? Does someone answer the phone or do you use an answering service or answering machine? All questions that will determine whether or not you will get corp credit or loans for your corporation.

If you are looking for financing put together a one page data form that lists all of your business information needed for obtaining corporate company credit. This check list will insure you have a strong foundation before you start applying for credit or loans. If you are unclear of what this data sheet is call a business specialist and ask what will be required for building a solid foundation. If they do not know then move on, they do not know credit requirements. Find a credit expert that can answer your questions or find a good corporate Credit eBook to assist you.

Once you have completed step 1: The company foundation essentials are complete and you are ready to start obtaining financing or credit.

Remember to verify and organized your data on one or 2 sheets of paper for later use. As an owner you will be finding yourself referring back to this information regularly when applying for vender credit, credit Cards or business loans or credit.

Congratulations, you will have completed step 1! You are well on your way to $500,000 in credit.

Now the Fun part begins, building your Business Credit.
Part 2: Corporate Credit Building Time Line
Part 3: Who should I use to build my trade lines before applying for credit or loans?
Part 4: Who & How to apply for credit for your business.

Plan, prepare and execute – It will work! Best of Luck

Creating a Profitable Internet Niche Business

Contrary to popular belief, many successful internet businesses have been started inexpensively and have become very lucrative businesses. You read everyday how so and so started an internet business from scratch with no money in his or her pocket and are now making thousands of dollars on the internet. It is possible.

What they do not tell you in the story it does take time and some money. The key to starting a successful and profitable internet business is finding a particular niche within a market that is willing to pay for products or services. How do you do that? With a little research, most people can find that market and create a niche business selling to their paying market.

Some people recommend keyword research to find a niche market. What is keyword research? Finding a keyword or keywords that people use to search for information on the internet. This is a good way to find a market but not the only way. Finding a niche market for a niche business requires a little more work than that.

Great ways to finding a niche is to check out forums, blogs, bookstores, eBay, and other websites that pertain to your business idea or ideas. This will give you an idea if your idea is popular enough to become a profitable business. Do not skimp on researching your market. This could be the make or break of your business. Failure to research your market could cost money and kill your internet business.

Researching your market should be your top priority prior to a business name or website design. Your target market will determine your website design and business name. They key to creating a profitable niche business is to target a segment of a broad market. It is not to compete against all the big players but to carve out a segment for your business with less competition. Your internet business cannot compete against the Wal-Mart’s all over the world but you can compete against the Wal-Mart’s in a targeted market if you have a product or service that has less competition with average to above average paying customers.

After you have completed your research for your business idea, then putting the other pieces into place will follow. The eBook Niche Business Secrets Revealed takes the new internet entrepreneur through the process of creating an internet niche business from start to finish and pieces in between. You will need to decide on a domain name, web hosting account, website design and more, which is all covered in this eBook. Most of the tools and resources needed a free and can be found by searching the internet or following the links to websites provided in this eBook.

In addition to finding, your niche and creating your internet business remember this is a business and there are legal issues you must follow so make sure you read a little on the legality of your business. There are copyright laws, trademark laws, plagiarism, and other items you must know about so you can create your business within the guidelines that are already established. Make sure you know the do’s and don’ts on the internet. This will ensure your business will be considered a reputable entity.

There is no such thing as “get rich quick” on the internet but there are such things as profitable, professional, reputable, and sustaining internet niche businesses. Maybe yours can be that one too with a little work.