On his blog post website http://askjonpaul.com, Jon Paul, President of Value Added Finance Resources and a Corporate Financial Expert, posted a warning against certian accounting practices that will negitively affect your business.
There is the story of a frog in the pot. If the water is hot, the frog will jump right out. If it is warm to start, the frog will stay in. As the water keeps getting a little warmer, the frog doesn’t notice. Eventually it gets hot and the frog is cooked.
Aggressive accounting can be just like the frog in the pot. The owner gets used to the new numbers. Abnormal becomes the new normal. It feels comfortable like warm water. The owner believes he is doing better than he really is. Instead of facing the pain and using it as leverage and motivation to make real changes, the owner carries on without making real changes to the business that are needed.
What do I mean by aggressive accounting? It is not fraudulent accounting, doing something that is clearly wrong. It is being aggressive where estimates are called for, such as:
- Inventory valuations
- Depreciation- useful life and salvage value
- Accounts receivable- collectibility
- Expense accruals
- Revenue recognition
Over a period of years, just like rising temperature in the pot, the effect of the aggressive accounting builds up. The gap widens between aggressive accounting numbers and results from typical practices.
Eventually the business may be cooked.
- The economy goes south and not even aggressive accounting can save the numbers. The changes in the business needed long get made too late to weather the storm in a tough economy.
- The bank gets acquired or decides not to renew the loan. The new prospective banker doesn’t buy in to the accounting and takes a pass on the company.
- The owner goes to sell but the buyer discounts the numbers heavily to put the accounting back in line with industry practices. The business sells for a fraction of what it could have.
When you have to improve your numbers, do it through real improvements. Take a hit on your numbers one year if you have to while you improve the business. Don’t play games with the numbers and start digging your grave.
Rieva Lesonsky is the CEO of SMB Connects, a communications company offering custom content and expert insight designed to help entrepreneurs build their businesses and achieve success. In a blog post on allbusiness.com, she defends why honesty with your staff is always the best policy.
I spent a lot of years as an employee hearing the phrase “This is business. Don’t make it personal.” I would nod in pretend agreement, knowing that in my situation, at least, I was right to inject some human kindness into the daily grind. I have always been a firm believer in the “we’re all in this together” school of management. The more inclusive you are, the more you share with your people, the harder they’ll work — in good times and bad.
Open-book management is nothing new. And though you might think economic crises are not the ideal time to share all with your staff, there may be no better time to do so. Think I’m crazy? The other day I met a former client for lunch (don’t ever burn your bridges) because he’d had a recent epiphany of sorts and wanted to tell me about it. I found the conversation so compelling I wanted to share it with you.
Tom Markel is the founder of iBank.com, an online small business financing network where customers can store all their financial information in an online “vault” and find lists of lenders willing to make loans. Since there isn’t a lot of lending going on these days, business hasn’t exactly been booming and Markel’s been doing a lot of soul searching.
A few weeks ago he met with several other business owners who were talking about all the people they’ve recently had to “let go” due to the economic downturn. That meeting haunted Markel. He thought about some of the business owners who said they “had” to let people go, yet were clinging to their 12 horses, 5 houses, or extravagantly expensive automobiles. And he remembered the employee he fired in 1989 on Christmas Eve because it was “just business.”
Markel’s company isn’t immune to the recession — far from it. But when he realized he too had to make some cuts, he decided to do things differently. He threw the “nothing personal, it’s business” concept out and instead reflected on his core values. And realizing he had to “share his pain” he put pride aside and opened up to his staff.
About a month ago he told them, “Times are tough and here’s what’s left in the bank. I don’t want any of you to leave, so what can you do to help?” In other words, he asked for wage concessions … and he got them. Employees volunteered to take pay cuts, salespeople went commission only, and 2008 bonuses were eliminated. Instead of iBank providing their usual free Friday lunch, the staff brown bags it during a Friday staff meeting and then gets to leave at 3 p.m. Markel promised when profits return (and things are already picking up this month, or as Markel puts it, “the sacrifices are already paying off”), he will “pay them all back” and return to the previous wage structure. His staff’s reaction? They wanted to know why he waited so long to tell them what was going on.
To read more of this blog post, Click Here
Lorraine Ball, President of Roundpeg, gives you some metrics you should use when deciding if your marketing plan is effective.
Earlier this week I introduced the concept of holding your marketing accountable by establishing metrics to measure performance. Because much of marketing is focused on customer acquisition, at least some of your metrics should measure elements contributing to your effectiveness at attracting new customers.
Customer-acquisition metrics include:
- Awareness levels. Have prospective customers heard about you? Is your name the first that comes to mind in the product category?
- Rate of customer acquisition. How many new customers have you added this month?
- Market share. Of the total number of potential customers in your market, what percentage comes to you?
- ROI (return on investment). As you evaluate the performance of a marketing program divide the cost of the program by the total number of clients you gained as a result. Compare the cost to the average sale per customer. How much are you spending to add one more customer.
By turning loyal customers into advocates, your customer-acquisition costs will decrease as the value of each current customer increases. Therefore adding new customers is only half of the equation. The other important metric deals with customer retention.
- Retention rate. Improving customer retention remains one of the most effective ways to drive profits to the bottom line. What percent of your customers renew services or buy from you a second, third or fourth time?
These are just a few of the possible measurements. How do you measure the effectiveness of your marketing?
In an article published in late April, Amy Barrett and Jeremy Quittner of Businessweek warn against credit-card processors who are increasingly demanding—or simply seizing—cash reserves from entrepreneurs.
In the midst of the worst economic contraction in decades, some small business owners are experiencing an additional—and brutal—cash squeeze, this time at the hands of their credit-card processors.
The recession and rising business bankruptcies have prompted giant credit-card companies such as Denver (Colo)-based First Data and Atlanta-based Elavon to demand that some business owners maintain a cash reserve with the processors in order to protect against the possibility that customers may require refunds after the merchants have gone belly-up. Most processing agreements give the transaction giants the right to accumulate those reserves simply by holding back money the merchant is supposed to be paid after a credit-card transaction has cleared, often with little or no warning.
Dan Price, chief executive officer and co-founder of Gravity Payments, a card processor in Seattle, says he has seen “dramatically more” cases of reserves being created for small accounts in the past year. He says he has not asked any of his clients for reserves but has requested regular financial statements from customers that might pose a risk. Price says the size of reserves varies greatly, but it is common to require an amount equal to one or two months’ worth of transactions.
The ramifications on even a well-established company can be dramatic. “In two weeks we would have been in bankruptcy,” says Angie’s List CEO Bill Oesterle, whose processor, Elavon, tried to withhold a reserve of $2.5 million from his $35 million company. Oesterle was instead able to change processors quickly, and with help from his lawyers, got his money back in about three weeks.
When a processor agrees to clear a company’s credit-card transactions, the processor then becomes responsible for providing customer refunds. When an unhappy consumer asks their credit-card company for a refund, the credit-card issuer gets that money from the processor. The processor, in turn, pulls the money from the merchant’s account. If the merchant has gone under, the processor has to eat the loss. With business bankruptcies on the rise, processors fear dishonest merchants might close up shop and skip town, leaving the processor on the hook for any refunds. “Before bankruptcy, some [unscrupulous] merchants will create lots of transactions,” says Richard Speer, CEO of financial consultancy Speer & Associates, based in Alpharetta, Ga. Common triggers for the establishment of a reserve include a sudden surge in activity and individual transactions that have large dollar amounts.
To read more of this article, Click Here
In a recent blog post, Alicia Glick of Bluelock defends why enterprises should not be afraid to use cloud computing. Bluelock is an IT company that delivers pre-configured, secure, and resilient virtual IT environments which scale on-demand and is one of the country’s only providers of Infrastructure-as-a-Service.
Rob England recently wrote an article on cloud computing entitled, “Cloud Computing Outlook Far From Sunny.” He adamantly argues that cloud computing is a good fit for “high risk/low-capital applications like startups or small business or websites” but has a “more jaundiced view” towards the cloud for enterprise computing and existing core applications.
Yes, everyone has jumped on the cloud bandwagon and is touting “cloud” on every offering possible in hopes of grabbing a small piece of a very large pie that being eaten up as we speak, but that doesn’t mean it’s a worthless technology for the enterprise. England says, “Quite simply, the idea is impractical for legacy enterprise applications.” He claims that this “technical solution” doesn’t really solve the non-technical business problems, but actually presents more problems, introducing greater complexities to manage. He doesn’t have software as a service in mind in this article, which is good because neither do I. He is talking about the “internal grids or hosted computing or the myriad of other things that seem to get lumped into ‘The Cloud.’” Great, because I’m assuming by that, he’s including what we call “infrastructure as a service.”
The number one problem, he argues, is migrating legacy applications. It is true that some applications simply weren’t built for the cloud, which is probably why he is so skeptical of legacy migration. But many others would argue that it won’t be impossible forever. Bernard Golden, author of The Case Against Cloud Computing, believes that at some point someone will develop a physical-to-cloud migration tool that can alleviate those technical migration pains. I’m with him. It’s going to happen.
But more importantly, I don’t believe that there is any reason why enterprise clients should stay away from cloud computing. There are many enterprise-level cloud options out there. And if the worry is that there will be too many pains associated with a large enterprise moving into the cloud, why don’t they opt for a full-service cloud, like those offered by managed service companies (such as BlueLock)? Then they don’t have to worry about the resources, people and time it takes to migrate everything to the cloud, their service provider will do that for them.
In her blog post, Lorraine Ball, President of Roundpeg, writes about customer relations and their importance in markeing strategies.
Early this year I read an article Tom Now wrote for StartUp Nation, listing what he considered to be the 20 hottest Internet Marketing Trends for 2009. Every few weeks I have gone back and taken a closer look at one or two of the trends, and how some of our small business clients are incorporating these trends into their own internet marketing plans.
This week: Trend #13: Relationship Marketing - In his post, Now said:
Companies will move towards a relationship-building model with their customers. The downturn in the economy means fewer new customers for a business. To address this, companies are going to need to focus on thrilling their existing customers and building longer-term relationships.
While I agree, relationships are critical, I struggle with the idea that this is a “hot trend”. To me trends come and go, but building strong relationships with clients this tactic is as old as business itself. What is new is our ability to use the internet to build and strengthen relationships with clients. And it is not easy, especially if you have a customer base, which is not really internet savvy.
My suggestion to small biz owners, start small, increase the number of forms, and download options on your website. Add comment areas to pages, and bring your brand to a larger community through your involvement in social media.
Consider changing your enewsletter from advertisement to information, about things other then your business. For example, I send a weekly event list. Yes I feature my events, but also just other programs of interest in the local community. The more I talk about others, the more my readership increaes. Give your clients something of value, and they will value the relationship.
Ron Sukenick, president and founder of The Relationship Strategies Institute, gives some HR advice on his blogpost.
I like to keep a lot of variety in my reading; you just never know where you’ll find a valuable lesson or tidbit of information. I ask my friends to send me articles they read for their own professions, or things they find online that I can use in training people to go beyond traditional networking. One lady who works in human resources field sent a fascinating article out of Employee Benefit Advisor magazine, written by a George Lane. Lane was talking about our “tenuous economy” and all the significant business risks involved.
Lane pointed out that “reductions in force” (read layoffs) “put many employers in a position from which they will be unable to complete once the economy picks up again.” He quoted a Mercer report about managing human capital during slow growth times. The report urges employers (this is one way in which this article is so relevant for my work) to “Communicate frequently and honestly to employees…to counter de-motivating messages.” The report praised executives at the European company LaFarge, who, in the face of a corporate initiative to reduce overall costs by 340 million euros, decided to increase their investment in employee education. Another company, Dimension Date, used a series of conference calls and Webcasts to communicate their “Think Wellness” program to employees.
Here’s what was so important to me about what these two companies did. They didn’t just start doing these things when the economy turned south, and they didn’t stop doing them using the downturn as an excuse. “Communicating often and retaining key talent are things that successful companies should be doing all the time”, explains Gorge Lane.
That is precisely what I’ve been teaching and preaching about business connections.
From my own observations, as I explain in The Power Is In The Connection, my theory is that if you keep interacting with someone, and only if you keep doing it (I advise at least six times), you’ll keep open the chance of building an incredible relationship. No matter what the economy is doing, no matter how you think your business is doing at any one point in time, staying in touch and making connections are smart moves.
www.employeebenefits.co.uk/benefits/staff-motivations.html
In a recent blog post, Michael Reynolds the President & CEO of SpinWeb, shares why having a great website is essential for your business’s growth.
At SpinWeb, we love working with manufacturing companies. So much opportunity exists to help them utilize their websites more effectively to facilitate growth. Many of today’s manufacturers, however, are facing significant challenges in utilizing the Internet to increase sales. So what are some things that make a difference?
1. Invest in a great design. Image matters. Companies that make great products need to present a strong image and the corporate web site is the place to do it. A great image can make the difference in lost or closed sales when prospective customers are performing the “sniff test” on your company to see if you can deliver.
2. Present your catalog online. I’m not just talking about a PDF download. I’m talking about having a full-fledged interactive product catalog that allows your customers to search, browse, and research your products online. Products should not simply be listed on a page, but should be part of a true product database so that individual product listings can be sent to prospective customers electronically as a link or via social media. This speeds up the sales cycle and gives your sales team better support as they present products. If possible, include video demos.
3. Collect leads. Manufacturing websites should be asking site visitors for names and email addresses so that email communications on new and updated products can be delivered. This keeps prospective customers in your funnel and improves your chances of reaching them when it comes time to buy.
4. Facilitate an ecosystem. Manufacturing companies can benefit a great deal from creating online communities that their customers can use to communicate with each other and share knowledge. This helps build value around your company’s brand and improves retention. An ecosystem can be an online forum, an extranet, or even a Facebook Group.
5. Utilize search engine marketing. Most manufacturing companies are not investing very heavily in search engine marketing. This opens up a huge opportunity for those who do. By investing in targeted search engine marketing, smart manufacturing companies can ensure that their products show up at the top of the list when prospective customers are doing reasearch online. This can make the difference between lost business or closed business.
6. Distribute documentation. If your products come with documentation that helps your customers better understand how to use or implement your products, post it on your website - all of it. By driving your customers back to your website, you are reinforcing the value of your brand. It also allows you to eliminate or reduce printed documentation, which saves money. Online documentation can also be updated in minutes - a huge advantage over printed documentation. I’m not referring to PDF downloads, I’m referring to an online database of documentation that your customers can search and sort easily to find what they need. This makes you easy to do business with and improves retention. It’s also a great sales tool because prospective customers can see how easy it is to get the supporting information they need about your products which reduces anxiety.
7. Increase your PR efforts using Social Media. Manufacturing companies should be investing in PR to increase brand awareness and tell a story. Social Media is a great way to extend your PR efforts. Press releases should be listed on your company website and then distributed via Twitter, Facebook, and LinkedIn. This improves your search engine rankings and encourages others to re-distribute your content for you. Make sure your website content includes “share this” buttons to facilitate easy distribution by site visitors.
Many manufacturing companies are not taking full advantage of their company websites to leap ahead of the competition which means that the ones who do will have a significant advantage. Support your sales team and your customers with a great website and enjoy greater customer loyalty and increased sales.
It’s both, and that’s the problem.
Some marketers are scientists. They test and measure. They do the math. They understand the impact of that spend in that market at that time with that message. They can understand the analytics and find the truth.
This sort of marketing works when it works, but it usually doesn’t. That’s because we’re dealing with humans, the wild card in the system.
The other marketers are artists. They inspire and challenge and connect. These marketers are starting from scratch, creating movements, telling jokes and surprising people. Scientists aren’t good at that.
The problem is caused by two things:
1. Outsiders are confused. Which are we? When we’re artists sometimes and scientists other times, we often seem like charlatans, because we’re associating scientific results with artistic endeavors.
2. We’re confused. If you don’t know if you’re doing a science project or an art project, you’ll probably emphasize the wrong elements. If you go to school to study marketing and the blowhard professor acts like she’s teaching you science, you’ll waste a lot of time trying to apply taxonomy and hypotheses to something that is essentially a gut decision. And vice versa.
We need hats. The hat of the scientist and the hat of the artist. You can only wear one hat at a time, which is why I didn’t suggest that we need gloves.
Figure out what sort of marketing you’re going to do today and go do that.
In her blog post, Lorraine Ball of Roundpeg shares why she thinks it is important to have integrated marketing strategies for your business and also shares several of her favorite marketing tips.
As a small business owner does it make sense to hire an employee, agree to pay a salary, give him/her a desk and computer, and then walk away? Would you be happy with that person’s performance a few months later? Maybe if you hired a really exceptional individual, but in most cases you are setting yourself up for disappointment.
To get the most from the investment you are making in a new staff member, it is very helpful to have a well defined job description and clearly outlined goals. Then your staff member knows on what to focus, and you have a way of measuring if you are achieving the result you want.
The same holds true when you make an investment in marketing! Spending money, without a clearly defined plan on how to support the marketing with your operation, or measure it’s effectiveness overall is like hiring an employee, and simply pointing him/her to a desk.
Integration - Pulling the Pieces Together.
For example, a client came to us to with a request to build a website in two weeks. She had committed to her first direct mail campaign and it was going to drop in two weeks and she wanted a website. Now we didn’t have a lot of time for planning or discussion on why this wasn’t a great idea. It was too late, she was committed and we got the job, because we could design the website in two weeks.
However, her company phone rings to her cell, and she was out of town for 10 days when the campaign dropped. So even though the pieces were in place for her success, she probably didn’t get the results she wanted, because she wasn’t prepared to support her campaign.
Measuring Results - Show Me the Money!
You invest in marketing to drive sales. Now sometimes it is a long process, as marketing drives leads, interest and inquiries which ultimately drive sales. But good marketing drives something. And you can measure if you decide what you want on the front end. Whether it is number of phone calls, traffic to your website, requests for quotations, you need to know on the front end how you will define success.
Recently, I printed 250 postcards promoting our web design services to new business owners in our community. We will be mailing these to a very well targeted list over a 30 day period. I was expecting 3 - 5 inquires as a result, and one sale.
So far we have mailed 150 cards, and received 2 inquiries, so we are on the right track. We will probably do another mailing to a larger list, promoting our PR services before the end of the year. I can make the decision with confidence based on the results I have seen so far.
On-Line Marketing Should be Accountable As Well
With all the behind the scenes measurement capability, there is no excuse for skipping this important step with your on-line marketing. Jason Falls wrote a great post on Web Analytics Basics for Bloggers. He outlines the basic questions you should ask:
- How many people have visited my site this month?
- How many of them stayed long enough to read anything?
- What do they do when they get here?
- How are they finding my site?
- What are my most popular posts?
As well as some great tools to help answer these questions.
Remember if you are going to ” hire” marketing, do a performance appraisal as a regular part of your process.
To read more of Lorraine’s blog posts, click here
