Buzz Your Business: JewelBasket

May 29th, 2009 by Sharon Larsen

This week on Buzz Your Business we’re featuring Zvi Dubin of JewelBasket, an online jeweler based out of New Jersey.

 

 

 

  

JewelBasket.com is a fast growing specialty jewelry & gift retailer, featuring contemporary styling and competitive prices. We offer specialty jewelry, engraving services, on-site jewelers and a broad selection of gift items, from antique to modern designs.

 

We began laying the groundwork for JewelBasket back in early 2003. Initially, I spoke with an acquaintance at a bar-mitzvah about starting an internet jewelry business. I had been a programmer for 15 years at several Wall Street financial firms, and I leveraged my experience to start the website. My partner and I both knew a person who had previously started an internet business, therefore it didn’t seem so unattainable. I did all the programming myself to save money, and each partner only contributed $5,000 to get started (sounds like bootstrapping to me!). To date, this was the only investment we needed to make.

 

 

My acquaintance was a jewelry manufacturer and had an office for his manufacturing business and we added a toll free number for JewelBasket. I immersed myself in learning about search engine optimization, became a DMOZ editor and bartered my programming skills with other store owners. In return for my programming, I received many SEO lessons and on basic e-commerce tactics. Over time I discovered niche markets, built vendor relationships and discovered value add services. Our business grew dramatically and we hired a real staff and began working with development and marketing firms. Later I added affiliate programs, discovered PPC strategies and began performing multi-variant tests, and much more. My partner managed and still manages order fulfillment and customer service.

 

I love your message about how to escape from the corporate world. It describes my feeling in detail. You will never be free, unless you work for yourself.

 

For more information, or to contact JewelBasket, here’s their information:

 

JewelBasket.com

19-03 Maple Ave

Unit 1

Fair Lawn NJ, 07410

866-815-3935 (toll free)

Email: cusomerservice@jewelbasket.com

 

 

If you know of a great business to feature on Buzz Your Business (your own or someone else’s), leave a comment on the blog and I’ll email you more information.

 

 

Porter’s Points: Continually Assess Your Environment

May 28th, 2009 by Sharon Larsen

Today we continue with Rich’s story showing the importance of continually assessing your environment, especially in small buiness.  As you recall, he was climbing the Pfeifferhorn and was approaching the summit when he realized he hadn’t been paying attention to the conditions on the mountain.

 

I had been so engrossed in reaching the objective that I had not taken the time to dig and block the snow. We had crossed the last 200 feet of snow, without once testing it. The composition of our foundation had slowly grown snowier, and I had not noticed the change.

 

Scraping away about eight inches of powder, I blocked out a 12-inch square. Underneath the powder I discovered a fragile shell crust, only four inches deep, hiding nothing but whipped cream. 

 

There, leaning into the Pfeifferhorn, I realized that I had placed my brother-in-law and myself in serious peril. I had overlooked basic snow climbing principles, and, as a result, jeopardized not just the climb, but our lives and my wife’s safety. Here, one misstep would bring down an avalanche, careening along the ridge and over the 1,500-foot free-fall. Looking toward my brother-in-law, I saw the mirrored realization. 

 

“We’re so close.”

 

He nodded. “How thick is the crust?”

 

I looked back to the crown. “About four inches. We could likely summit this baby without much danger. Getting down, though, without triggering a slide—I’m not willing to chance it.”

 

My brother-in-law crouched to give himself a look at the snow. “Let’s call it off.” He stood up. “It’s too unstable. If we start sliding, we have no hope of surviving the fall.”

 

I looked back to the crown. “As much as I hate to admit it, it’s the right call.” We hiked back across the ridge and joined my wife for the descent.

 

I was fortunate that day. I caught my mistake before anything fatal happened. But you understand: you must continually assess your environment. You must think things through. Every upward step and every backward slide has to figure into your view of the environment. You can’t overlook the key principles just because you understand them; you must apply those principles if they are to provide physical or financial safety. High-altitude climbers, in business and life, must be confident in their ability to reach the summit; however, that confidence cannot be allowed to mask the need for vigilance.

 

Recent real estate market trends are a perfect example of a continually changing environment. While I, my wife, and my brother-in-law all got off the Pfeifferhorn in safety, I have had several close friends who haven’t been quite so lucky with their figurative Pfeifferhorns. They were making a killing doing high-end, speculative developments and hard-money lending, perfect techniques for a bullish market. But just like I failed to assess the changing snow conditions on the mountain, they got caught in their thrust toward the summit and jeopardized their financial footing. They lost their monetary safety as millions of dollars spiraled off the edge and into the abyss.

 

Look along your own Knife’s Edge. Spectacular view, isn’t it? Not a cow within miles. But you’ll only get there with thoughtful consideration and planning. Keep your eyes peeled and your senses sharp, and don’t let the eye-on-the-prize mentality blind you to what else surrounds you. This is your honest, necessary awareness of the environment—the ever-changing landscape of business and of life.

 

Porter’s Points – Continually Assess Your Environment

  • Take time to look around. It’s great to be able to focus on your goal, but even if the path to success seems obvious, it’s a path through a busy business environment. Don’t let yourself get blindsided by easily avoidable obstacles.
  • Tracking cash flow, keeping up on accounts receivable, and diversifying and expanding your client and supplier bases does you no good if it’s a one-off effort. Each of these is impacted by outside forces, and you need to keep an eye on the trends.
  • If you find yourself on a ledge with only four inches between you and oblivion, take time to back off and try again. Find a better way out, work around the obstacles inhibiting your success.

 

And with that we finish Chapter 8: Avoiding Cow Pies.  Next week we’ll begin Chapter 9: I Never Want to be a Doctor (And Certainly Not a Lawyer!). 

 

 

Continually Assess Your Environment

May 26th, 2009 by Sharon Larsen

Today we begin the last cow pie that entrepreneurs should keep an eye out for: assessing your environment.

If you can avoid the first three cow pies I’ve shared, you can get your business off to a running start. Once you’re smart about cash flow, net terms, and keeping a stable clientele, you’ve got all the tools to make great things happen—which means you have to start doing the making. Too often, business building gets so involved that the builder forgets to assess the landscape, or believes that there is not enough time to have a look around. Don’t be that kind of builder. If you stay on top of your business environment, it will ensure your safety and reveal which turn in the trail will take you the right way. The long-term success of your endeavor depends on regularly and systematically making this sort of assessment. If you walk through the business world with both eyes wide open, you will be less likely to wind up in financial peril.

Not long ago, I relearned this principle while climbing the Pfeifferhorn, an 11,326-foot peak in northern Utah. I remember the experience well.

 

The air sparkled with energy in the sharpness of the cold predawn. My skin tingled in that way it only does at high altitudes. I breathed deeply and filled myself with vitality as I gazed up at our goal. A few feet to my left stood my wife. Kneeling to her left was her brother, hunched over his backpack. Our objective for the day was to summit the Pfeifferhorn and be back in camp before sunset revealed the twilight stars of late December.

 

 “Okay, guys, let’s bag this sucker.” I was met with grins. We

started forward.

 

Bearing ice axes and crampons, we set a steady pace for our team of three. My adrenaline pumped, pushing me forward and upward. Six hours into our quest, the brilliant white crown of the Pfiefferhorn jutted heavenward before us. Taking a quick break, we replaced snowshoes with crampons and prepared for what turned out to be a one-hour ascent up a 40-degree slope.

 

“How does the snow look, Rich?” my brother-in-law asked. I was digging out a small section of snow, blocking it out to get a feel for what lay beneath. It was crucial to know what was underfoot in each direction. Avalanche danger was always present. And this high up, frequent checks would be required for the safety of my team. 

 

“Great! It’s perfect for climbing. This is gonna be easy.” Exuding confidence, I encouraged us forward.

 

Every season, climbers of the Pfeifferhorn have to face the infamous Knife’s Edge. Soon enough, it stretched out before our team. It is narrower than a sidewalk and flanked on both sides by thousand-foot gutters. This is the path to the summit. The path to victory.

 

The Knife’s Edge ridge terminated at the final, looming, 400-foot crown of the mountain. Once there, we could see a sharp slope that vanished into seeming eternity. From here on out, one misstep, one unexpected slide, would drop the unlucky climber through a torrent of snow onto the rocky crags that lay hundreds of feet below, dying at best, dead most likely. 

 

The three of us assessed the situation. At nearly 11,000 feet, the view from the ridge was breathtaking. Adding another 400 feet would bring the thrill of victory and an even more unbelievable panorama. This close to our objective, my brother-in-law and I felt our second wind, confident in our ability to summit the peak. My wife wasn’t quite as enthusiastic and expressed some apprehension about the snow- and ice-covered pitch before us. 

 

“Guys, I’m going to wait here. If anything happens to you, someone needs to be in a position to help,” she said. 

 

“Okay.” I looked back up at the peak. “I agree. That’s how we’ll play it.” 

 

Ice axe in hand, I led out. We made good time, soon finishing the last of the Knife’s Edge and attacking the final 400-foot stretch to the crown. Crampons crunched and ice axes sank firmly as we ascended until we were about halfway to the summit. I stopped for a quick breather and turned back to see where my wife stood. Fear grabbed my gut as I looked. My thoughts froze with the sudden realization of what I’d forgotten. I watched chunks of snow that had been kicked loose by our climb as they tumbled to the edge of the cliff and disappeared into nothingness.

 

We’ll finish the second half of Rich’s story on Thursday and see why it’s important to continually assess your environment, whether in mountain climbing or in small business.

 

 

Buzz Your Business: Wizard of Ads

May 22nd, 2009 by Sharon Larsen

Today is our first Buzz Your Business post and we’re featuring Dave Young of Wizard of Ads. 

 

 

I’ve been a Partner in the Wizard of Ads consulting group since 2002. My focus is helping owner-operated companies grow their businesses through better advertising, marketing and strategy. To me, there’s something very gratifying about working with the owner of a small business instead of the marketing committee in a large company. I’ve done both, and I can say that the excitement of sitting across the table from the decision-maker is always more exciting.

 

One of the unique aspects of our business model is being paid according to the results we deliver. We set a consulting fee for the first year of working with a client and then adjust it according to the rise or fall in gross sales in subsequent years.

 

Our core services include website development, copywriting, media buying, email marketing, public speaking and teaching. I’ve been focusing on the area where on-line and off-line marketing intersect. Specifically, applying web analytics to radio schedules to measure web traffic that is the result of radio advertising. Emerging technology is making this easier to do and is providing a new level of accountability to traditional media.

 

My first exposure to Rich and Ron was when they took a class I was co-teaching last fall. It has been my pleasure to get to know them and spend time with them. Their book and their wise counsel have helped me focus my own business in some very important and strategic ways. I’m very excited for their success and have been recommending their book and program to every business owner I come in contact with.

 

My favorite chapter in Bootstrap Business is “Fire, Fire, Fire, Aim!” The lesson comes from Rich’s experience hunting rabbits. Instead of hunting around for a rabbit (or perfecting a new product or service line) it sometimes works best just to lob a few shots into the bushes and scare up some rabbits (launch your product or service in a bunch of directions at once to see who gets interested). Only then, do you “aim” for one of the rabbits you flushed out of the bushes.

 

I often tell my own clients that the biggest benefit to hiring a consultant is to see your business through a fresh set of eyes. Reading Bootstrap Business (and getting to know Rich) has been that kind of experience for me. Thanks for writing it!

 

Dave Young blogs at www.BrandingBlog.com and his services are described on his website at www.PersuasionPro.com.

 

 

If you have already submitted your business for consideration for Buzz Your Business, there is no need to resubmit; you’ll remain entered until I feature your business.  If you would like to enter your small business to be featured, leave a comment on the blog expressing interest and I’ll email you details.  Let me know if you have any questions or would like more information about contacting Dave Young! 

 

Stability

May 21st, 2009 by Sharon Larsen

With two cow pies under our belts (but hopefully not under our shoes!), we move to the third cow pie for small business: stability. 

 

 

When it comes to stability, I’ve got another farming metaphor: don’t take a one-horse show on the road. You are extremely vulnerable when you have all your eggs in one basket. (Okay, that was two farming metaphors). It’s great to have an initial big-name customer; in fact, you can and should use that to build credibility with other potential clients. The same goes for a customer that buys lots of your product; once you have them, go out and get ten more. Don’t let losing one account make you lose your business.

During the early stages of our endeavor, Ron and I landed a large New York City music label. This was a big deal for our budding venture. We celebrated at a nice restaurant in Time Square. A couple of bumpkins from way out West had scored a Big Apple icon as a client! The deal was penned for a six-month term. Six months may not be long, but our client was big, and it would have been easy to coast for a little while.

What I have learned is that when you get a lucky break like that, it’s fortune’s way of giving you time to set up for your next one. It’s okay to celebrate your newfound breathing space—in fact, I’d encourage it. You’ve done well. You deserve a pat on the back and a nice dinner. Just don’t go for six months of back-patting and dining out. While income from the big client is driving your business, you have time and money to gain more clients, large and small. For Ron and me, in the six months that followed we went and got more business. When this contract came to a close, we didn’t worry about the financial viability of our company. We had several clients in place, and were safely out of the pasture without stepping in anything messy.

Just as important as the number of customers is their diversity. When this deal ended, we had toeholds in a number of other viable arenas. I’ve been in situations in the past, however, where one company or one market was my primary source of revenue.

I remember a sad happening between Google and me: one day, Google decided to up and change how it managed its organic traffic. And when Google rewrote a simple algorithm, it completely killed my business. With that one tweak of a little line of code, my venture was sunk. As a matter of fact, I’ve seen some reports that Google’s “Florida Update” drove somewhere around 30,000 small businesses into the ground with that algorithm change. Products hadn’t been diversified, and a whole wing of the market collapsed. 

Securing a diversity of suppliers is likewise critical. You can rest assured that if one of your suppliers steps into the sort of unstable cow pie that you are avoiding, you will be left unsupplied. If you can get one product or service from several different sources (without exorbitant costs), try it. If a mismanaged client base is like stepping in a cow pie, your major supplier’s downfall can be like kicking your feet out from under yourself and landing hard in the mess. You’ll stand up from the field dirty and smelly if you don’t have backup plans in place.

 

Porter’s Points – Stability

 

  • When that big customer puts pen to paper on the dotted line, celebrate! Your venture has been validated! Now get back to work.
  • Diversify and expand your clientele. See how many niches your product applies to, and get as many customers from each as you can. If one wing of the market takes a hit, you should still be able to fly because of the customer base you’ve built.
  • Your suppliers are running a business just like you—but perhaps unlike you, they may have not taken a good look at the pasture lately. Don’t count on all your supplies coming through one route. If one of your suppliers hits a cow pie, things could start to stink for you. Diversify and expand suppliers.

 

Next time we’ll talk about the last cow pie Rich and Ron address in Bootstrap Business – the necessity of continually assessing your environment. 

 

 

 

Death by Net

May 19th, 2009 by Sharon Larsen

The second cow pie for entrepreneurs is death by net.   

 

If you’re going to bootstrap a business, you need to internalize this irrefutable truth: nobody cares about your money like you care about your money. Nobody! That’s why you track your cash flow daily, and why you must also articulate and enforce your net due policy. A net due policy has to do with when your clients’ payments fall due.

 

Generally, businesses do not expect the complete fee for their service before starting work. Some ask for net-60, net-30, or even sooner terms—that is, they require their clients to pay the full balance within 30 or 60 days of the invoice. Articulating your policy is important—“net terms” could mean anywhere from seven days to sixty. Enforcing your policy is crucial—just because you say you have a two-week net due policy doesn’t mean that everyone will pay in two weeks.

 

Your net due policy determines the promptness and amount of your accounts receivable. This is vital; accounts receivable, after all, are the flow to your cash. You must have cash coming in—and you must know when, where, and how much—because otherwise, you will only have cash going out. If you aren’t careful with your approach to your net terms, you will experience leakage. Leakage is bad. In cows, it makes for an extra mess. In business—well, you get the picture.

 

I have sometimes had large companies as clients that have systematically tried to get out of paying their bills, particularly those submitted by smaller vendors. They would purposely delay payments for 30 days, or even 60. Why? Because these companies had discovered that if they held off payment long enough, the smaller businesses would either lose track of the payment or else just tire of the continual ankle biting in the money chase. They could usually trust small business owners to forget about the invoice altogether—or just give up on collecting it. For you, then, the moral is clear: don’t let anybody bully you into losing track of your receivables—and don’t lose track of them yourself!

 

A second angle on this cow pie: if the money isn’t in the bank, it isn’t in your pocket. Once you’ve trained yourself or your multipurpose first hire to think in terms of cash flow, it’s really exciting to go into QuickBooks and see that you’ve got a huge balance. That definitely ups your confidence—as does writing your checks out of QuickBooks and seeing that there’s money there to cover them.

 

Confidence usually deflates at the next realization, though: QuickBooks is not the bank. Even if you have pending payments showing up as assets in your balance sheet, it’s not real money until the bank says so. Actual money needs to come in.

 

A firm net due policy will help both of these issues. What kinds of terms do you give for payment? Do you allow 45 days? 30 days? 15 days? I always submit seven-day terms. Sometimes they stick, and sometimes they get bumped to 15 or 30 days—but I never permit a company to take more time than that to send me my payment.

 

When I sit down to my QuickBooks, it is usually a very close representation of what is in the bank. Many small-scale businesspeople will allow longer terms so that they can charge a more expensive rate. Getting paid big amounts is nice, but if your accounts receivable start to lag, it means that your vendors get a bite out of you before you even sit down to eat at the buffet they are supposed to be providing. The speed of your pay is every bit as important as the amount. As with anything else, you have to strike a balance, and I far prefer to get paid quickly especially in the tender stages of the venture.

 

Short-range net terms are good, but what if you have a particularly stubborn customer? Having seen many small businesses die because some accounts receivable were never collected, I have established a “collection escalation path.” Most of the time it works, and the method only involves a simple conversation. My partner or employee brings up the topic first, as the deal is being settled. It goes something like this:

 

“You’re going to love working with Rich—he’s a savvy businessman, good at what he does, and for the most part easy to talk to. But the one place you don’t want to go with him is late payments. If you don’t pay on time, and Rich gets wind of it—well, no one wants to be in the building when he makes that call. I’ve overheard a few, and they can get ugly. Very ugly! Whatever you do, don’t be late with a payment—but if you’re always on time, you’ll never get better work done than what he will do for you.”

 

Do they make me sound a little like a Mafia boss? No, because I’m a really nice guy—I’m just a nice guy who wants to be paid on time, according to policy. I’ve seen this work with small and large companies alike.

 

If the payment is a day late, have your administrative assistant place a call. Giving the company the benefit of the doubt will sometimes result in an immediate payment. If the company gets to be a week late, have the accounts receivable manager place a call. Have the person make a statement to this effect: “Your account is going to show up on Rich’s report. He’s going to see this shortly, and we need to get it resolved or you’re going to get a call and, let me assure you, you don’t want that call from Rich.”

 

Nine times out of ten that solves the problem. If for some reason it doesn’t, all I have to do is place a phone call, even just leave a voice message, and say: “Hey, this is Rich. I’m really concerned about the finances here.” After all of the suspense that has been built up, a simple call like that is usually enough to get the people owing me money to take care of the situation. It is remarkably effective for collecting receivables on time.

 

No amount of accounts receivable, though, is any good unless you have a plan behind it that you are committed to follow. The questions that you ask while constructing your net due policy are also good for checking up on yourself later on. Some of these questions are: what is the state of my accounts receivable? What is my net due policy? How about my suppliers—thirty days net? Sixty? How do those all affect each other? When do expenses fall due? Will I have enough revenue flowing in at the right time for that? How about rent and utilities—when are they due and how much are they? How often do I need to pay insurance and taxes?

 

If you don’t have answers to these questions before you start, get some. You don’t want to empty yourself of cash at the beginning of the month, waiting around for your net-30s or net-60s to kick in.

 

Later on in your venture, if your plan doesn’t line up when you check up on it, look at your feet! You’re still walking through the pasture and might end up on the squishy ground of lagging accounts receivable. Create a calendar to organize your payments or have your miracle first hire help you out. Get and keep a visual of how all the financial pieces fit.

 

While we’re on the topic of your money as it relates to your clients, be careful about who you extend credit to. It can be tempting to be liberal with credit in hopes that extending it will somehow come around and benefit you on the upside. While money is definitely a method for friend-making in the business world, foolishness with money is great for bankruptcy-making. Be smart about to whom and how much you extend credit, and be sure to keep accurate records. Secure yourself first. Do background checks on anyone you give credit terms to and always follow up. Bring out the big, bad Rich if you have to. You can’t be too careful with your credit.

 

Whatever the financial scenario, if your money goes out, make sure you bring it back in. Don’t let your services go unpaid and don’t be afraid to be blunt about it. If you don’t care about your money, nobody will—at least, they won’t care about getting it back to you.

 

Porter’s Points – Death by Net

·         Avoid spending money you don’t have yet. Part of avoiding death by net is checking your cash flow—and checking it against your actual bank balances.

·         Net terms need to be set so payment comes as scheduled. Firmly back up the terms of your client agreements, and be prompt, friendly, and effective in providing your services. They want you on the job. Give them what they pay for—and don’t let them delay paying you.

·         Credit can do great things for your business relationships, unless it runs away from you unchecked. Keep a tight lid on who you loan to.

                 

 

Now we’ve covered the first two cow pies for small businesses: cash flow and death by net.  Next time we’ll talk about the stability cow pie.

 

 

Buzz Your Business

May 15th, 2009 by Sharon Larsen

In honor of the overwhelming responses we’ve received on Twitter, we’ve decided to institute our own version of Follow Friday, called Buzz Your Business.  Here’s how it works: twice a month, every other Friday, (or more often depending on demand) we’ll feature a different small business on our blog.  This is where you, the reader, come in.  If you have a business you’d like us to feature, leave a comment on the blog and I’ll email you with more details.  We’ll basically do a post about your business – including what you do, how you got started, what your favorite section of Bootstrap Business is and how it’s helped your business. 

 

Once again, if you have a small business you’d like us to feature, please leave a comment on the blog with your email address and I’ll be in touch.  Don’t worry about posting everything about your business and your favorite section of the book in your comment, just let me know you’re interested and we’ll go from there.  The small businesses we feature will be decided on a first come, first served basis, based on the appropriateness of the business.  Let me know if you have any questions.  We look forward to hearing about your amazing companies!

 

The Cash Flow Cow Pie

May 14th, 2009 by Sharon Larsen

The first major mistake that kills most small businesses is cash flow.  We’ll talk about how to avoid that cow-pie today.

 

 

The shortest distance between you and smelly shoes is to let your cash stop flowing. Balancing profit and loss is the lifeblood of your company. In the early days of your venture, it is especially critical to conduct a daily review of your financial standing. Yes—I said daily, so do it! Some days the review will take five minutes; other days, your company will require a more detailed look. Regardless of how long it takes, make the time. You must know whether or not you made money, and you must know it today. Right now.

 

The first step in staying on top of your daily cash flow is to devise a thorough tracking system well before the cash actually starts to flow. It doesn’t have to be complicated, but the end result of your system must be that it gives you a clear picture of what went out and what came in each day. Apply your system so that you always know how your financial picture is shaping up for the month.

 

Determine how you will structure your tracking system. Out of the gate, a simple Excel spreadsheet might work nicely. Once you start increasing your income and expenses, you will want to consider a prepackaged software program like Quicken or QuickBooks. Whatever system you choose, be disciplined enough to track your cash flow daily (there are those italics again). It’s like watching your step between here and the fence out in the pasture. If you don’t do it, you’ll regret it.

 

Just as important as how you track your cash flow is who does it. If you already have the skills to do it, use them; if not, you can take a bookkeeping class online or through your local community college, or even just check out a book from the library. If you think you will need extra help, hire an affordable, part-time bookkeeper. As you get a greater vision for your venture, the best thing to do is to find someone who is able to wear many different hats: administrative assistant, editor, bookkeeper, customer service agent—whatever gaps you need to fill. This hire will be a great asset as your venture progresses.

 

If you decide to do the bookkeeping yourself, be sure to refer to the principles on knowing yourself in Chapter 1, “Grit,” and be sure that you really are up to the task. Specifically, are you a detail-oriented person who will track every penny—who loves tracking every penny—in and out? If you’re not, don’t be penny wise and pound foolish. Hire someone who will track your pennies and your pounds.

 

While we’re on the topic of cash flow, I want to talk about a related cow pie that many businesses owners can’t seem to avoid. It is the mess-waiting-to-be-stepped-in of “robbing Peter to pay Paul.” Leave Peter alone! Paul will take care of himself! What I mean is, taking money from your business’s marketing budget (or any department’s budget) to make your personal car payment (or any personal payment) not only impairs your marketing but will likely cripple your total cash flow. The same goes for using money from one business to support another. These are accounting nightmares waiting to happen. Keep your money separate and your books clean. Consistency here maintains good trust relationships all around.

 

Occasionally, you may find that some borrowing is unavoidable. If that is the case, keep detailed notes of the transaction. Make sure you know exactly when what went where and why it went there. An audit is not the place to sit, scratch your head, and wonder, “Why the [cow-pie] did I do that?”

 

Your dream really can thrive, but only if you understand and manage your cash flow.

 

Porter’s Points – The Cash Flow Cow Pie

 

  • Cows need to be milked twice a day. Tracking your cash flow is twice as easy—you only have to do it once a day. But you have to do it once a day, or else, like the cows, things might blow up in your face.
  • Your system for tracking your cash flow can be as simple as sitting down with five minutes and an Excel spreadsheet, or it can be as complicated as hunting out a new hire. If you can’t hack it on your own, get someone who can. Chapters 14 and 15 speak more to this point.
  • Leave business cash in the business! To the extent that you can, keep personal needs away from business funds. If you have to cross borders, reread the second bullet and track the transactions religiously.

 

 

Next time we’ll get into the second common cow-pie for entrepreneurs: death by net.

 

Porter’s Preface: Avoiding Cow Pies

May 12th, 2009 by Sharon Larsen

Toady we start Chapter 8: Avoiding Cow Pies with Ron’s introduction.  If you don’t know what a cow pie is, you’ll soon learn!

 

I had a funny experience a while back where I dropped the term “cow pie” in casual business conversation in New York City. It was funny because Rich and I, being small-town rural types, both knew exactly what I meant, but the gentlemen we were with, being big-city businessmen, had no idea. From their blank looks, they seemed to be trying to figure out what we did with our pumpkins or apples if we were making pies out of cows.

That experience made me realize that both the term and its business application may need some explanation. After all, if it were as simple as swapping beef for berries in Grandma’s time-honored recipe, you’d be wondering why you ought to avoid this particular piece of pie. When you leave this chapter, you will have a clear understanding of why you don’t ever want to be served a slice of cow pie.

Business has its own kinds of cow pies. It can be easy to let your accounts receivable start to lag, for example, or to slacken the frequency of tracking your cash flow. Once you head off into that particular pasture, though, you’re bound to wind up with a boot stuck in the muck.

In this chapter, Rich is going to outline four of the most common “cow pies” in business. As with the real thing, do your level best to avoid these not-so-fun surprises. The four business cow pies are: unmonitored cash flow, lagging accounts receivable, out-of-balance suppliers and customers, and failure to assess your ever-changing business landscape. 

Cow pies are not entirely avoidable. No matter how gingerly you step, you will, from time to time, feel the squish under your shoe and the queasiness in your stomach that accompanies contact. Happily for you—and your shoes—you can circumvent most cow pie snafus with a bit of conscientious planning. 

We’ll talk next time about the first cow pie entrepreneurs must avoid: the cash flow cow pie.

Time to Part Ways

May 7th, 2009 by Sharon Larsen

Since all good things (and hopefully all bad as well!) must come to an end, it’s important for entrepreneurs to set clear expectations at the beginning for how to exit a partnership.

 

 

I’ve had several really good, healthy partnerships, and I’ve had several that, to put it mildly, “went bad.” I’ve found these situations to be among the most painful, drawn-out experiences of my life. As I reflect on these partnerships it’s evident that each began to go south when one of two things occurred:

 

  • Our ultimate goals or intentions became misaligned
  • We began to seriously question each other’s motives

 

Once one of these things had occurred, it was all downhill from there.

 

In Chapter 19,“No Exit Strategy?” I will describe in detail a variety of ways to exit your business. For now, I’ll just reiterate that the exit plan must be clear. Your hope and design is that the exit will be a good thing for all involved. But what if it isn’t? What then? Plan it and capture it in contract form. Have your attorney review it. Make sure both the amicable separation and the hostile separation are clearly defined. Then do your best to ensure that the parting of the ways is a positive experience for all involved.

 

Business partnerships are not intended to last forever. Oftentimes, there will be an exit, and many times, there even should be. Your business agreement did not contain the words, “’Til death do us part,” so why should reaching the end of your road together be surprising? The problem with terminating a partnership stems from your exit plan not being laid out and having an unclear “last step” in the life of the partnership.

 

In reality, the ultimate success of any business is to have a positive exit event, which by its very definition means a parting of ways. If you leave it to chance, there is no question that people will get defensive, and what could have been a preplanned, celebrated, and successful parting of the ways will become something ugly—something very, very ugly.

 

Porter’s Points—Time to Part Ways

 

  • Your partnership will end. Do not let the ending rest on happenstance–plan it out.
  • Your ultimate success as a partnership will be a successful exit. Your worst failure will be a hostile parting of ways.

 

That does it for Chapter 7: Fish & Partners!  Next time we’ll start talking about the big mistakes that kill most small businesses and how to avoid them in Chapter 8: Avoiding Cow Pies. 

 

 

The Friends and Family Plan

May 5th, 2009 by Sharon Larsen

After learning that three is a dangerous number, today we talk about starting a business with close friends or family.  It too can be dangerous, if not properly handled. 

 

 

Ah, the family business. It’s a time-honored, American tradition. It’s also one of the best ways to kill your venture (or your siblings). Everyone likes to complain about work from time to time, but it’s not as easy to complain during Thanksgiving dinner when your boss is the one carving the turkey. This can cause some real problems, for your venture and your appetite.

 

I’ve seen situations where a husband and wife got involved in businesses together, and it took a heavy toll on both the business and the marriage. I’ve known quite a few people who own businesses where their entire family is involved.

 

There are times when family businesses work, but frequently they don’t. On the outside, they may seem to work just fine, but if you ask for the inside story, you’ll find out that uncles don’t talk with nephews, and the son hasn’t spoken to the father in five years, and someone in the family is not pulling their weight.

 

My father is a very wise and thoughtful man. He was the elected county attorney in our community for 36 years. At the age of four he became blind, having both of his eyes removed to prevent the spread of cancer. His experience as county attorney allowed him to offer the following invaluable insight. “Most partnerships fail because each partner only wants to give forty-five percent. With that kind of effort, the venture is always coming up a bit short. In order to find success, each partner needs to be willing to give seventy percent.” (John. O. Christiansen)

 

Frequently, with family we don’t feel as big a need to prove ourselves or do our part. Right or wrong, it seems easier to take advantage of someone you love.

 

Again, the only thing that can be more disruptive and more damaging to a family-run business than failure is success, if it isn’t approached right. Challenges can help people work together and sacrifice. Success can bring out greed and encourage loved ones to cut in line or cut and run altogether.

 

There was a very successful businessman who amassed a fortune worth over one billion dollars. As he retired, his entire family became involved at various levels with the holdings of the company. The family now hates each other; there have been internal power plays for control, suicides, divorce, and every other crisis that can be imagined in a family. Most of the discord revolves around “the family money.” I once heard this famous businessman state he would forego all of his riches just to have a united family.

 

Is it worth sacrificing your greatest riches in life—namely, your family relationships—for the fleeting riches of this life? I strongly believe not!

 

It’s important to note that family-run ventures can work, if you take the right precautions. What are those precautions? From my observation, the most important thing is to have rules and structures that clearly and openly delineate the involvement of the family members who enter the business. The second precaution? Give time, energy, and focus on a goal or vision greater than the acquisition of money or things.

 

Make sure you feel comfortable having open, honest discussions with your family member partners. Disagreement or conflict about the business cannot translate into contention in the home or at family events. However difficult it can be, you have to make sure that everyone is mature enough to keep the two relationships separate.

 

No matter who your partner is, you need to share a work ethic and style. You also need to be invested in each other’s image. Help your partner look good. There is no room for selfishness in any partnership. Unfortunately, there is something about family businesses that can readily bring that destructive character trait to the surface.

 

Porter’s Points—The Friends and Family Plan

 

  • If you choose to partner with family, treat the partnership like a business, not a family outing.
  • Temper the quest for success and the unpleasant scenarios that quest can create, by giving time, talents, and energy to a worthwhile cause (charity, humanitarian effort, foundation, etc.).
  • Put your partners’ well-being before your own.

 

 

If you want to start a family business, or already have one, make sure you have rules in place that ensure close relationships aren’t sacrificed!