What Businesses Can Learn About Success from the World Cup

Now that the World Cup has come and gone, I noticed that teams’ success characteristics are similar to company success traits. Here are a few:


Leadership – The teams that went far in the World Cup had inspired leaders. Argentina’s Diego Maradona, for instance, has not been coaching for long but his passion, energy and love for the game served as motivational tools for his players. Argentina's players seemed to tap into Maradona's energy and Argentina went far in the tournament. The same is true for leadership in business. A successful company is usually accompanied by an inspired and passionate leader who sets a positive tone for his employees.

Desire to Win & Never Give Up – Many of the World Cup teams were similar in ability. Many times, what made one team win was the “fire from the inside”. The U.S. team had this quality. Landon Donavon and the rest of the team had a "never say never" attitude that helped propel the U.S. to the next round. Businesses must also have a similar unwavering drive to succeed. Many companies recently have re-emerged from bankruptcy with good leadership to fight another day. The desire to win is necessary for long term company success.

Confidence & Enthusiasm – Ghana is a team that had the confidence to go far in the tournament. In many games, they were playing a country with technically better players and better overall records; however, they managed to level the playing fields with a collective belief that they could win. And despite the odds, they managed to advance almost to the quarterfinals. The same is true for small businesses. A business must believe in the idea that it can succeed in order to succeed. When facing any opportunity and/or problem it's the "I CAN" attitude that will help get a business to the next level.

Timing – The best teams knew when to strike and when to pull back and guard their leads. Germany is an example of a team that “went for it” when the timing was right (and scored sizeable leads), and retracted when necessary. Businesses that succeed know when to strike and when to be conservative. It's key for a company to understand good timing in order to maximize opportunities when available, but then guard its assets and retract when times are not so good.

Skill – The teams that went to the final rounds ultimately had some of the most skilled players (and the above characteristics). It is also important for businesses to have and deliver the best products in the most professional manner possible. For professional services businesses, the skills of the professionals should be refined regularly and new skills learned in order to stay competitive. Prior to this year's World Cup, only six countries had ever won this title. This year, a new country ( Spain ) has been entered among those prestigious ranks and added to the record books as a World Cup champion. Similarly, with the proper guidance, passion and expertise, there is always room for a new company to advance to the top.

SMALL BUSINESS FINANCE TIPS: Maintaining Your P&L During a Down Economy

For any small business, managing revenues, costs and expenses comes with inherent challenges - especially in a down economy. For example, maintaining healthy profit margins – in the face of rising materials and labor costs – can be daunting, but is necessary for a small business to thrive and survive in today's economy.

I have developed the following tips to help small businesses best maintain their P&Ls that I hope you all find helpful:

Revenue:

- Create revenue plan & hold employees accountable for the plan
- Lock down clients with long term contracts if possible – to help revenue become predictable
- Plan to continually grow revenue (this will guard against client drop off)
- “Love” your existing clients/customers keep them happy, send thank you cards, buy them an occasional thank you present
- Grow revenue with existing clients/customers (these are your best opportunity)
- Get rid of undesirable clients (this will not help you in the long run)
- Use a sales tracking software/tool to help you find keep focused on new client opportunities
- Have action plan for growth & action plan for downturn and be ready to use (do not be caught off guard)

Expenses:

- Revisit P&L results on a monthly basis
- Ensure the expenses can easily be identified (i.e. make sure that there is not one vague line item where all expenses are booked)
- Continually compare results against income and expense benchmarks

For a professional services firm for example:
- The net margin of no less than 20% of revenue (note: ensure that the owner/officer salary is included as an expense before looking at the net margins)
- Employee costs should be about 50% of revenue; look at revenue per head as another metric – revenue per head should be no less than $150K; Greater than $200K per employee is preferable
- Rent should be no more than 3-6% range of company revenue
- Spend money (5-10% of revenue) on business development
- Incentivize appropriate employees around expense goals to ensure the company stays “lean”
- Ensure that the company is profitable and keeps a healthy margin (this will guard against down times)
- Keep and maintain projections which would include actual results PLUS forward looking projections for the year
- Include spending on assets/depreciation (a non-P&L item) in the monthly review…this is an area where spending can get out of hand and often gets overlooked
- Do a vendor analysis on an annual basis (keep good relations with your vendors but make sure that an expense is not widely out of whack)

I welcome all thoughts comments and feedback!

GUARDING YOUR BALANCE SHEET – Tips for Survival in Today’s Volatile Market

As the the recession continues to extend into 2010, we continue to be inundated by news about the challenges that face the small business community.

While we are not completely out of the woods in terms of the economy, there are several things that small business owners can do to protect their businesses during these challenging times:

1) Manage Collections: Outstanding invoices should be aggressively followed up on round-the-clock. Having unpaid invoices will create instability. Be aggressive and assume the worst.

2) Collect Upfront: Make sure that all of your contracts stipulate payment upfront. Net 30 can stretch into Net 60, then you are stuck doing work for 2-3 months without being paid.

3) Turned Unused Equipment into Cash: Do not let any unused equipment sit around…turn it into cash immediately.

4) Limit Company Credit Cards: When only necessary, provide your executives with corporate credit cards. Don’t give them out to your entire staff and never give out debit cards to your employees.

5) Managing Account Payable: You want to keep as much cash in the bank at all times. As such, pay only critical vendors first, then pace vendor payment with receivable collections. Stay away from regular payments on credit cards. You can dig your business into unnecessary debt in no time.

GUEST POST: John Garcia, Tax Director at Targus Group International, Discusses Increased Scrutiny from States Due to Budget Deficits

We were fortunate enough to receive a guest post from John Garcia, Tax Director at Targus Group International. John is a well renowned CPA and MBA, professor and corporate tax veteran. John shared with us his recent concerns regarding the increased scrutiny from States due to budget deficits in the following illuminating blog post:

With imploding budgets and other fiscal woes, it is no secret that many states are hurting financially. To help solve these problems, states are formulating and implementing new innovative state tax regimes that spread their tax bases.

Interstate commerce that traditionally was protected from state income tax by federal legislation such as the Commerce Clause of the US Constitution and Public Law 86-272 are no longer valid. Already, Texas, Michigan and Ohio have enacted state tax measures which subjects multi-state enterprises to tax when there is only a minimal connection to the state.

The mere presence of consigned inventory, a sales person, and even a Website can subject taxpayers to multi state tax. Clearly, this is not a short term matter but a sign of things to come. So, if you are concerned, it might make sense to do a Nexus study and be prepared when that out of state auditor sends you that audit notification.

It also makes sense for business owners to consult your tax advisor to create strategies to mitigate fines and penalties associated with non-compliance with State legislation.

PLAN FOR THE FUTURE: DON’T GET CAUGHT “OFF GUARD”

As the Jim Morrison of The Doors once said, “the future’s uncertain, and the end is always near.” While he may have been referring to his short and rather debaucheries life, he was right about one universal thing: the future is uncertain.
Now, is the end always near? I will be the first to admit that I am not an expert on Nostradamus studies, so I will let the religious and academic scholars try to answer that question. I do know though that uncertainty about the future is a common feeling for most small business owners.

In fact, as soon as an entrepreneur loses sight of this, they can get very complacent and easily get derailed. And, from a financial planning perspective, I believe it is critical for any company to develop a strategic plan for the future. This plan could include planning for additional funding, an acquisition, or if they are ambitious an IPO. Either way, a plan is needed for the “end game,” or as many call it an “exit strategy.”

While many CEOs have studied finance, or have financial backgrounds, it is critical to get the right financial talent on board to help develop these strategic plans. Most people would not try to re-wire their houses would they? Of course not…they bring in an electrician to handle with this complex and somewhat dangerous task.

The same could be said for using the right talent to handle financial planning. It is the future after all. And, if Mr. Jim Morrison is right, the future is uncertain. So, why not bring in the right experts to make the future clear, bright and within reach.

Planned Obsolescence: Success Means Clients No Longer Needing Our Services

Many contractor/company relationships are dictated by the contractor’s ability to justify its services, and be retained for the longest possible time. While this makes complete business sense from a professional services perspective, and unless it’s an ongoing business issue being addressed, shouldn’t a contractor do such a good job that their services will eventually no longer be needed?

In pretty much any professional services sector, the answer is actually “no.” It is much easier for contractors to keep an existing client happy – and engaged for a longer period of time -- than fight to find new business.

As a provider of outsourced financial department services, I actually take a counter intuitive approach and believe in providing the financial backbone to allow a small- and/or mid-size company to spread its wings and fly -- without the need of our services.

Most small companies will eventually need to hire a CFO and/or a full-time accounting team, and they should if they are doing well. As such, before the start of our engagement, we clearly identify that changeover point and plan accordingly to transition to an in-house solution.

And, the reality is that we to develop a solid financial infrastructure to allow for our clients to one day out grow us. Once a company reaches this point, we have done our jobs. And, isn’t that what it’s really all about?

SMB News Round Up: Failed Emergency Small Business Boost and How to Avoid a Tax Time “Train Wreck”

Every so often, I like to compile some of the latest news headlines in the small business sector. As always, there is no shortage of news to cover – since the SMB sector is the backbone of our economic recovery. This news round up post includes a number of stories regarding the America’s Recovery Act (ARC), as well as tips of how to avoid any tax time “train wrecks.”

An Emergency Small Business Boost That Fizzled
A stimulus measure crafted to get emergency funding to Main Street businesses has turned out to be such a flop that even its Congressional advocate wants the program killed. But for the 5,000 business owners who have jumped through all the hoops to land loans, even a flawed lifeline is better than none at all. The "America's Recovery Capital" (ARC) loan program was created as part of February's $787 billion Recovery Act. From the very beginning, the program struggled. Congress ordered the Small Business Administration to release guidelines for the loans within 15 days. Instead, it took four months. Read the full CNN Money article here.

Unsecured Small Business Loans—Will They Help Businesses And Unemployment?
Small businesses obviously need capital to run and maintain a certain standard of operation, and in the past unsecured small business loans have been a source of that capital. Also, small businesses are needed to combat unemployment and make more jobs available for those who are seeking work. The problem seems to be that if a small business is doing well, even in the face of a tough economy, just getting by or making a decent profit isn’t going to be enough for them to grow and expand their workforce. Bringing in enough money to pay expenses, employees, and maybe put a little away isn’t going to go to far in helping a small business create more jobs. That is where unsecured small business loans come into play. Read the full Red, White and Blue Press blog post here.

Small Firms Should 'Increase Their Website Presence’
As someone who has been advising small businesses for more than 25 years, there has never been a better, yet more challenging, time to start or run a small firm. The contradiction in that statement is deliberate. Better, because never has the playing field been so level - and challenging, because of the current economic malaise. Running a small business requires a skill set of extraordinary proportions, and it really is a miracle that so many survive, yet alone prosper. Read the full BBC article here.

Small Businesses Can Avoid a Tax Time Train Wreck
For some small-business owners, income tax filing season feels like a slow-motion train wreck. These are often owners who tend to be disorganized and unable to keep good records. Instead of keeping their companies' books with a small-business accounting program, they use a stack of overstuffed file folders or worse, boxes and shopping bags. They often end up spending hundreds of extra dollars paying their accountants to sort through the whole mess -- provided the accountants will even agree to deal with it. Read the full Salt Lake City Tribune article here.

WHY OUTSOURCING YOUR FINANCE DEPARTMENT MAKES SMART BUSINESS SENSE

For many smaller and mid-size companies, the hiring CFO-level talent can be too costly and completely unfeasible. In addition to searching for the right candidate, you have to offer a highly competitive package – even in today’s economy – to attract the top-level finance talent you need for business success.

In addition to requiring C-level finance talent, smaller- and medium-sized businesses require a dedicated finance department that can handle the entire spectrum of financial support services – from strategic financial business planning to day-to-day accounting.

So, the challenge is posed for any entrepreneur…how can I have a viable finance team without the dedicated resources for hiring talent?

A more cost-effective and sound business approach is to outsource your complete financial needs. Here are the reasons why this makes complete business sense:

• You Can Get Senior, CFO-Level Support for Strategic Financial Guidance


• All Accounting Can Be Taken Care of Seamlessly


• Outsourced Partners Can Provide an End-to-End Solution


• Outsourced Partners Often Provide On-Site Support (i.e., Can Work in Your Office a Couple Days a Week)

So, rather than making the investment in internal finance talent, outsourcing to the right partner can help bring your business to the next level. Much like many companies outsource marketing and advertising support, why shouldn’t a company make a similar – and more cost-effective – investment into the right finance team?

Small U.S. Business Owners End 2009 Downbeat? Things Seem Better to Me

The National Federation of Independent Business recently issued its small business optimism index, which fell for the second straight month, dropping 0.3 point to 88.0 in December. According to the report, the reason for the dip is that small businesses were hurt by weak sales and worries about government policies.

According to a statement from the federation’s chief economist, William Dunkelberg, "Continued weak sales and threatening domestic policies from Washington have left small business owners with little to be optimistic about in the coming year.”

What is interesting about this news it runs counter to what I am seeing in the marketplace: SMB owners are starting to feel optimistic. 2009 was, without a doubt a tough year for the entire U.S. business sector, but things are looking up.

This week, the Federal Reserve Board issued a report saying that economic activity has been picking up in recent months in New England. The report also stated that things were getting better in Texas. And, retailers reported that holiday sales were up from last year.

These are all signs that things are getting better. My gut is telling me that that National Federation of Independent Business report results were influenced by a general fear that many SMB owners had in Q4 2009. Don’t worry the fear will subside and better times are ahead (saying this cautiously, of course!).

SMB News Round Up: Can the Big Banks Spur Job Creation, and the Obama Administration’s Efforts to Trim Joblessness in the SMB Sector

Every so often, we like to highlight some of the key stories that deal with the small business sector. As always, there is no shortage of news since the SMB sector is so vital to the health of our economy. Today, we feature a wide range of stories from the White House’s efforts to trim joblessness to an analysis of whether some of the larger banks will help spur job creation in the SMB sector.


Will Bank Of America, Wells Fargo, CitiGroup Lending To Small Businesses Spur Job Creation?
In 2010, lending to small businesses, from institutions like Bank of America, Wells Fargo, and CitiGroup, is said to be the one way in which unemployment can be effectively combated. As governmental stimulus programs are said to be temporary and no real fix for unemployment, target a small section of workers, like state employees, or are not set to take place for years down the road, many are left wondering about what are the solutions for the now. Read the full blog post from the Red, White and Blue Press blog here.

White House Plans More to Trim Joblessness
President Barack Obama plans more economic stimulus measures to bring down the high U.S. unemployment rate, while cutting the bulging budget is a longer-term challenge, a top White House economic aide said on Sunday. "We are ... talking about actions right now to jump-start job creation," White House Council of Economic Advisers Chairwoman Christina Romer said on CNN's "State of the Union. "You don't get your budget deficit under control at a 10 percent unemployment rate," she said. Read the full Reuter’s story here.

8 Essentials to Succeeding With a New Business
Thanks to modern technology and the Internet, it's become relatively easy for just about any aspiring entrepreneur to start a business. In fact, it may be too easy, say small-business experts, considering that 86 percent of all small businesses fail within the first three years. If you want to avoid the same fate for your own start-up, you need to lay the proper foundation and groundwork. Read the full Newsday article here.

SBA Boost: Money Makes Loans Attractive to Both Lenders, Business Owners
The nation's financial meltdown in late 2008 has made it more difficult for small businesses to get loans, but millions of dollars in federal stimulus money has given small-business loans a boost in El Paso in recent months, some in the lending community said. The dollar volume for Small Business Administration-backed loans grew in El Paso last year in large part due to $375 million in stimulus money available nationwide to enhance lending features of SBA-backed loans, and has helped keep loan activity strong in the past several months, said Phillip Silva, director of the SBA's El Paso district office. Read the full El Paso Times article here.

2010: A New Decade and New Threats for Small Businesses

Although 2010 is poised to be a turnaround year for small businesses, and things may start to seem a bit rosier, business owners must anticipate emerging threats and always be on guard. The tides can turn at any moment. A new competitive force could emerge and knock you on your feet. New legislation and tax codes could prove harmful. Or, as is the fate with many small businesses, Google could decide to take over your industry sector – then you are in real trouble.

Below are the emerging threats as I see them for small businesses in 2010 and beyond.

The Uncertainty of the Tax Code – Nobody really knows what will happen with taxes in 2010 and beyond. With our biggest deficit ever and anticipated additional spending over the next few years, it is almost certain taxes will increase. In fact, the major provisions of the Bush tax cuts are scheduled to “sunset” as of the end of this year. As a result, this will give less incentive for an entrepreneur to grow a business, and give private equity less incentive to invest in speculative but higher rates of return.

Competition from the individual 1099 contractors -- Although 1099 contractors are somewhat entrepreneurial in nature, professional services firm will face major competition from individual contractors (in the US and overseas) in addition to other competing firms. Tom Freedman’s book “The World is Flat”, explains this challenge and the challenge is a threat now more than ever -- with so many out of work professionals.

Access to Capital -- Although the Obama stimulus has earmarked hundreds of millions of dollars for SBA loans, companies still are finding access to this money harder than expected. In addition, the Venture Capital funds and tolerance for risk simply does not exist going into 2010. Entrepreneurial companies must become profitable from the start and not count on debt or equity for help.

Surely this is just the tip of the iceberg in terms of threats. As always, I welcome all comments, feedback and insights.

SOCIAL MEDIA AND SMALL BUSINESS: HOW MUCH SHOULD YOU PAY?

2010 is shaping up to be the year that many small businesses will be dipping their toes into social media world. For many small companies, having the internal marketing resources to manage social media campaigns is just not feasible.

As such, many companies will be looking to outsource these efforts to social media firms and/or consultants. This is certainly a sound strategy. But, the big question that looms for many is: how much should I be paying for social media? As a financial services executive who works with both small businesses and PR/marketing firms, I wanted to share some pricing insights.

BLOG DEVELOPMENT AND MANAGEMENT
Many small companies are opting for the self-publishing method of bypassing the media filter and communicating directly with customers and prospects through a blog. You should be able to find a marketing partner who can handle all elements of the blog including content creation, podcasting and social media dissemination through Twitter and other social media channels. This is a very valuable service and the range for a small company should be somewhere between $5,000 and $10,000 per month (depending on the required blog activity per month).

CREATIVE CAMPAIGNS AND VIDEO CONTENT
Developing creative campaigns that are tied into more high-value content like video can be costly. However, not every online video has to appear as if Francis Ford Coppola produced it. And in the new Flip video era we are living in, there are other ways to keep the video production costs down. That said, for more professional/creative videos, a small company would want to pay about $10,000 per campaign. And, for the more DIY-videos, the scale should be somewhere between $3,000 to $5,000 per video.

TWITTER, FACEBOOK AND LINKED-IN CAMPAIGNS
In 2010, many small businesses will need someone to manage all other social media elements – besides the actual blog. This means, developing and running their official Twitter feeds, Facebook Fan Pages and Linked-In Groups. In addition, an outsourced marketing partner can promote content on a myriad of Linked-In groups that are industry related. As such, a comprehensive campaign that contains all of these elements could easily touch thousands of prospects on a daily basis. This is a very valuable service and the range for a small company should be somewhere between $5,000 to $7,000 per month.

Social media is still the “Wild West” in terms of determining what you should be paying. And larger companies have the financial resources to pay for larger social media campaigns. The budgets I have highlighted in this post are based on what I have seen in the industry and are geared towards smaller businesses looking to enhance their marketing through social media. I hope you have found this helpful. I welcome all thoughts, comments and feedback.