Category Archives for "Small Business"

Avoid These Types of Customers at all Costs

By Randall Orser | Small Business

Is any customer a good customer when you’re a small business? No, they’re not. As a small business owner, you probably realize just how important it is to grow your client base and keep them coming back. However, there are those customers who are just too much to handle. As a small business owner, you are more likely to connect more closely with your clients, so interacting with a bad one can leave you in a delicate situation. These types of interactions can be way more stressful than what they’ll cost you in respect of your time, money, and reputation. The following ten customers are the ones to definitely avoid, even when starting out.

The Endless Negotiator

Are your prices set in stone? Or are you open to some negotiation? I would think you’d have a good idea of what you’re going to charge any given customer. However, there are those customers who just insist on bargaining and determined to do so. This person will constantly move the goalposts to get a better price or more perks, forcing to adjust costs with no actual promise of their business. Just say goodbye and move on to someone who’s more than willing to pay what you want to charge.

The Customer in a Rush

Mr. Rush always wants the full package deal done in half the time, and they won’t take no for an answer. If you can negotiate a fair price for the rush job, then go right ahead. Sadly, this person is just trying to push you to complete an impossible job for little pay, and you just need to say no. If you feel the timeframe is unrealistic, don’t feel pressured to work to it; otherwise, you end up exhausted, your staff are too, and end product that’s not up to par, and a disappointed client.

The Buddy

This is someone you knew vaguely in college, or your cousin’s best friend, or someone you met at a party that one time. This person is determined to us this connection to manipulate a better price, in order words, you do fair work at an unfair price. Don’t get caught by this person. You’re fine to offer a ‘friends and family discount’ but don’t feel compelled to do it for everyone who says they’re a buddy.

The Time Hog

If you’re a service-based business, then this type of customer is especially dangerous. The Time Hog is very willing to pay what you ask, and their request is reasonable, however, they’re going to ask a thousand questions and demand an absurd of your time with meetings and updates. This kind of customer will require extra time, and you should calculate your hourly rate based on how much extra time you need to spend with them. In the end, you’ll probably realize that they’re just not worth the hassle after all.

The Bad Communicator

This customer sends haphazard emails, doesn’t answer your questions, and you end up improvising much more than you’re comfortable with doing. You may be thinking they just don’t care what they get in the end, but that’s not usually the case. The bad communicator is usually the one that refuses to pay or gives a bad review chastising you when they don’t get the result they wanted. So, unless you can read minds, just say no to this type of customer.

The Freeloader

No one likes a freeloader, but it’s sometimes hard to tell which of your customers are just being fussy and which are freeloaders. The freeloader usually wants something for free before doing business with you, such as samples, or for the designers out there a mock up. Almost always, the samples are all they’ll want, and they may even try to sell them to someone else. Determine what your policy will be in regard to samples and hold firm from customers who demand for more.

The Enquirer

Customers will always make inquiries, however, there are times when you get that knot in your stomach that says, ‘Why does this person care about that detail?” When a customer enquires looking for detailed answers to a lot of specific or unusual questions, before they’ve even started working with you, then more than likely they’re not a customer at all. Other businesses or potential competitors may be using this as a way to analyze the specifics of what you offer, which is just a waste of your time.

The Customer Who Knows Best

This customer worked in your industry decades ago, or an old college pal ran a similar business, or they’ve been getting information off the internet. Showing real interest is a good thing, but being an uninformed know-it-all isn’t. They will disagree with your methods, ignore your advice, or contend that they know better than you. This customer will never be happy with the finished product no matter how hard you try.

The Perfectionist

This customer comes to you with high expectations and highly refined sense of what they want, so you need to be careful on how you continue. If you feel your abilities can make their dream come to life then go ahead, however, if you’ve got any doubts then stay away from the perfectionist. They won’t change their thinking no matter how unrealistic it is, so don’t even bother going down this to start.

The Customer Who Promises to Return

Stay away from that first-time customer who keeps telling you what they could do for you if you’d just do this job for free, a steep discount, or lots of free samples. This especially goes for creative people as most of these types of customers will tell you about all the “exposure” you’re going to get by working with them, which is absolute BS. Good repeat customers determine whether they’ll work with you again based on what you delivered to them, not before. Stand firm and only offer the same kind of perks you’d offer any first-time customer, even if they keep pushing.

Bad customers end up being a bad headache for you and your business. Worst-case scenario then can end up being disastrous for your small business, especially when you’re just starting out. To keep your business running smoothly, happily, and free of unnecessary drama, avoid the above ten customers at all costs, even when first starting your business.

You Need to Know These Five Accounting Tips

By Randall Orser | Small Business

Did you know that accurate accounting is important to whether your small business lives or dies? Accounting is so dreaded by most small business owners that they would rather go to the dentist than do their books. As a small business entrepreneur, don’t let procrastination over your accounting become your reality. If you are willing to be proactive, there are ways to manage your accounting. The following five tips for managing your bookkeeping will, hopefully, make it seem not so overwhelming.

Balance Your Books Regularly

Delaying until month end to reconcile your books could be a costly mistake. Accounting errors are caught much faster within the week rather than digging through a month’s worth of receipts. Ongoing bookkeeping is not just better for your sanity but could lower the amount of money you might lose to an accounting blunder, accidental or deliberate.

Using Your Own Money

Most small business owners start out using their own money to pay for supplies, and often don’t realize the importance of keeping business and personal separate. You want to make sure your business starts off on the right foot, and continues, so ensure your personal finances are completely separate from your businesses revenues and expenses. Keep track of your data is essential. A business account and a credit card that is only used for business are essential.

Manage Your Receipts

I bet you never realized that your receipts fade over time, especially those thermal ones; and, never mark them with a highlighter as that destroys them. What would happen if your receipts which you’re planning on using for tax write-offs were no longer legible? What if you couldn’t even find them. This is where accounting software can help you manage those receipts on a regular basis, so you never have to worry about them when year-end tax preparation comes around. We recommend QuickBooks Online for your accounting and supplement that with Hubdoc, which is an online document retrieval and storage system.

Compliance Management

This is critical for efficient small business accounting. You need to understand the accounting compliance restrictions, as well as the specific compliance requirements for your business. Your accounting software should be set up to address any compliance requirements of your business specially to avoid costly issues at year-end.

Mange Your Cash Flow

A good cash flow is absolutely pivotal to small business success and not something you should overlook. It’s easy to get used to paying for procures or services on credit, only to be horribly surprised when you reconcile your books. As a small business owner, you need to understand the importance of cash flow and profitability, otherwise you may make impulsive purchasing decisions that may impact the long-term viability of your business.

By paying attention to the above five accounting tips, your small business will stay on track. Effective accounting plays a pivotal role in the survival of your small business, and not understanding that will lead to failure. Instead of looking at business accounting as a dreaded tax think of it as a growth mechanism, and you’ll appreciate the critical role a well-managed set of books plays in your business success.

Lowering Your Rates Could Just Kill Your Business

By Randall Orser | Small Business

Sadly, many freelancers can’t afford to turn away work too often. Indeed, many freelancers are in a nonstop battle for income, especially when they are just starting out. Unfortunately, most will start dropping their rates at some point to increase business, however, this invariably isn’t the greatest move to make. Here are some of the reasons why dropping rates could kill your business.

It Sets a Precedent

Setting your pricing too low in order to gain work early on ensures that it’ll always be a battle to raise rates to reasonable level later. Why would someone pay more when they know you’re capable of working at a discount? The risk is high that you’ll get stuck with a considerable workload but unworkable fees. And, sadly, with no time to look for more profitable opportunities.

Perception of Quality

Your potential clients may see that cheap price as a reflection of poor quality, and that maybe you don’t really know what you’re doing. Which would you rather be known for, providing premium services with the appropriate pricing, or the bargain-basement worker churning out quantity to make ends meet?

Real Impact on Quality

You’ll find that if you rely on volume to bring in the cash, then the quality of your final product is going to suffer. That could end up being a vicious circle of which you’ll never get out.

Race to the Bottom

You may be working independently as a freelancer, but you’re not immune to market forces. If everyone in your industry lowers their fees to compete, then that reduces the value of the entire market. You’re better off not adding to the problem by lowering your fees when everyone else is do so. You actually may be better to keep your pricing, or maybe even increase it, as you’ll be seen as of better quality; plus, potential clients may see those others lowering their prices thinking they’re in dire straits and not around much longer.

Sell on Value Not Price

You won’t have a viable business model if all you do is sell on price, there’s always someone out their willing to undercut you. You’ll never compete with something like Fiverr workers from far-flung places; you need to find your unique selling position and focus on that. Let’s face it the clients going to Fiverr and the like aren’t really the kind of customers you want anyway.

No Room for Development

As a freelancer, you need space to develop your skills. When you discount your fees, you need to be working constantly to generate revenue, and that leaves with little time to grow. Successful business, and you are a business, invest a lot of money into research and development, and you should too.

You started out by turning your talent or passion into a revenue generator, but you are a business after all is said and done. Your figures need to add up if you want long-term success. Setting yourself up as a discount provider may bring in the work now, but be careful it doesn’t become a trap that frustrates your future developments.

Hire the Right Graphic Designer

By Randall Orser | Small Business

Strong visual branding is the difference between success and stagnation in business. We’re visual creatures and your visual first impression of your business can rest on your design of your marketing elements (logo, etc.). If you’re going to get serious about brand building, then you must find an experience and talented graphic designer.

Most small businesses starting out don’t have the budget to hire in-house for this, so what do you need to consider when hiring a freelance graphic designer or agency.

Industry Experience

Many industries have a loose, underlying design theme used by successful brands within them. This greatly affects the type of design you should consider using. As an example, a snowboard clothing brand would need a very different tone and feel than a senior’s care facility.

Granted it can be useful to step outside the ordinary, it does pay to know the common themes and conventions as starting points, and it’s helpful if the designer can draw on their experience of previous work in your industry.

Range of Previous Work

However, simply imitating the style of your competitors will do nothing to build your distinctive brand. A versatile designer will have professional experience in an assortment of industries and can bring a wide range of influences into their work. Although you may want to hire a designer because of their individual style, they need the flexibility and experience to adapt their work to your company’s needs.


Does the designer have testimonials from previously satisfied clients? Most designers have some kind of testimonials, though there may be confidentiality issues that rule that out. Nonetheless, there has to be some way of checking their previous experience.

Professional Portfolio

The portfolio is an absolute must, whether or not testimonials are supplied. Proof-of-ability examples are okay rather than actual client work, however, it’s necessary if you’re going get any idea of the level of work you should expect. If you’re not impressed by the quality or have other serious issues such as disliking the fundamental style, then just stop now. You’re highly unlikely to get the designer to radically change their style just for your project.

Working with Others

Wide experience should also have furnished the designer with an ability to work with others in your organization. An effective designer should be able to liaise with your web team to ensure the results match their needs. Are they happy with this level of communication, and who will be the point of contact for your staff? Also, how will you get progress reports, and who do you speak with if there’s a problem.

Delivery of Goods and Legal Issues

Which formats will the work, once completed, be delivered in? Who takes ownership of the original files, including any rejected drafts? Who retains the copyright? While for professional designers and agencies none of those should be a problem, it’s best to ensure the details are expended before commitments are made and money changes hands.

Professional Insurance

Does the designer have insurance for their work, and will they indemnify you against any risks? Trademark violations and plagiarism accusations can be costly to resolve, but they shouldn’t be your problem if they arise.

Realistic Pricing

Like many creative industries, price expectations have been lowered over recent years, largely because of easy online outsourcing through bargain-basement platforms such as fiverr. However, you need to be realistic about the fees a reputable agency or freelance would charge.

If you want a relationship with a competent and proactive professional, this is going to cost more than a one-shot project ordered online. Find out what the initial fee covers, what it doesn’t, and whether a retainer option could offer a better deal all round.

No serious entrepreneur would disagree on the importance of a trusted and attractive brand, and the imagery your company uses is a crucial component of this. Taking the time to find the right graphic designer is a solid investment in the future of your business and could be that crucial aspect that puts you out in front of your competition.

Stand Out from the Crowd

By Randall Orser | Small Business

Your small business must stand out from all the others for you to succeed; however, what if you’re new and no one knows you? Are you stuck in that Catch-22 scenario? You need credibility, but it’s hard to get those kudos until you get customers. What do you do when clients don’t even know you exist? The six tips below will get you noticed and customers will find you attractive, even being the new kid on the block.


Your hard work in your business isn’t the main characteristic, but it is important. How do you expect to succeed without a product or service that is excellent? You need to do everything you can to ensure your work is above the average and your efforts won’t go to waste. Yes, customers haven’t found you yet, but when they do, they’ll never forget you.

Go the Extra Mile

Is going that extra mile crucial to standing out? Take it from the customers’ point of view, and you’ll think differently. Wouldn’t you want to deal with the company that goes that extra mile and provides better value for the money? Going the extra mile, that your competitors aren’t, makes your clients feel that they’ve made the right decision to work with you.

Gain Exposure

You need to get your business noticed to attract customers. To get the attention you need use social media, advertising, websites, testimonials -- when you get happy customers, press releases, and media events. I can’t stress enough that you need to use first-rate marketing materials to allude that your business delivers high-quality merchandise or services. There’s nothing worse than meeting someone who’s done the DIY business card with the fringe from being torn apart showing; no one is going to take you seriously.


Establish an iconic brand that people associate with your business to raise your profile and gain visibility. Know your offering, what makes you unique in your industry, and accentuate this in your story about how the business started.

Embrace Originality

You want to study your competitors, but don’t copy them. Take note of those areas that they excel in, but don’t copy them too closely. Copycats seldom come out on top because the established brand usually has the edge. Nonetheless, learn from others mistakes in order to avoid making the same mistakes.

Work with Establish Brands

Are there any established, successful brands in your industry? Linking your business with them lets you gather prestige for your business. Piggyback on their creditability and people will associate the exceptional qualities connected to that reputable company to yours. You can do this by forming a joint venture, by which you help each other. You could write a guest blog post for that credible company’s website and include a short bio with a link to your business.

It takes time to get your business recognized, however, this process can be sped up by producing superb work and going that extra mile. Make your company as visible as possible and create an iconic brand. Be original too and connect with reputable businesses in your industry and you can’t help but stand out.

You Need to Implement These Four Things in Your Business

By Randall Orser | Small Business

For your small business to be successful, you need to be organized, otherwise, you’re just running around like a chicken with its head cut off. You face a huge struggle to just get one thing done when you’re unorganized. The following four items are what you need to be organized about in your business.


Your time is valuable, and you need to treat it as such, as nobody else will. Your time is also limited so use it wisely. You need to commit your time to work, home, and yourself so you can run your business.

To-do List

Having a to-do list is crucial to getting things complete, and then continually updating it. A good thing to have is a weekly planner showing what you must get done, what you’re accountable for that week, things you’d like to get done, and even things you should stop doing. Your to-do list will allow you to get right to work when you start your day at the office (even if that’s a room in your home). You always know what you should be doing, even when you find that rare occasion with time to spare.


Being organized in your office/shop is very important, you don’t want to spend an inordinate amount of time trying to find things. You end up behind in your work, and less motivated to start (it all just seems too hard).


This is THE business killer, not keeping track of your paperwork. Keeping up-to-date on your paperwork allows you to know who has paid you and who still owes you. Plus, you will know who you owe too. You should also ensure you have copies of any insurance policies, rental agreements, etc.

In order to know the health of your business, you need to be constantly up-to-date on your paperwork, as that can say a lot. The information provided via your accounting can make you realize you need to work harder or you are reaching your goals you had set for the business.

Organizing is very hard, and you need to be constantly vigilant, however, it’s totally worth the effort. Take the time now to rearrange your business, and you’ll notice a big difference. You get more done and make more money!

Are you Winning? Using the Figures to Boost Your Home Business

By Randall Orser | Small Business

The main indicators of success for your business are ‘work’ and ‘finance’.  

Work is a straightforward measure of how much work you have on at any time.  How many orders have you completed?  How many are there in the book that haven’t been started yet and how many are in progress?  A regular view of the value of orders in the book and the value of work finished each month will provide a trend.  

Finance is measured in many ways.  For the small business, it can be simply ‘what’s in the bank?’ and ‘how high is the overdraft?’    As with the work, however, a regular review for trends is extremely valuable.  For both, a trend upwards is a good sign that business is good and getting better.  Downwards is almost always not good.


The most obvious measure that everyone watches is simply ‘how much money is in the bank?’  A credit balance is good; an overdraft can be a challenge.   The balance will be the difference between money paid out and money taken in.   If you have more money going out than is coming in, you will not be in business for long.  The trick is to identify it early and find out what’s going wrong.

If you have a lot of orders coming through and being completed but are still not making money, first confirm that the invoicing and receipt processes are running smoothly.  No one will pay if you don’t ask them for it! 

Next, review what you are charging for your product against what you have to spend to make it.   Be sure to include your overheads in the cost calculations.  If it costs you £20 per month for the telephone services and during that month you can produce 100 of your product, then the cost calculation for each item must include 20 pence to cover the telephone overhead.  Similarly, electricity, premises rent and rates, insurances, any employees (and your time), and any other charge that you pay, will all have to be covered by what you charge people for your product.  The basic calculation is simply to divide the annual cost by the number of items you can produce in a year.  The price at which the item is sold must include the complete cost for producing it.  A small extra amount added into the price on top of the cost is your ‘profit’.  Too much and people won’t buy.  Not enough and you won’t be making enough to stay in business.

If it is costing you more to make than you are charging for it, then you have two avenues: put up the price you charge and/or cut down the costs for making the product. 

I’m Charging Right but Still Not Making Money

If the charge for your product already covers the item production and you are selling and invoicing successfully but still not making money, then you may be building up a stock of materials or parts.  This is easily done if your practice is to order slightly more than you think you will need, but never go back and use the extra that is sitting in the stock cupboard.  If you have built up a high stock, you need to consider how to reduce it and maintain it at a more appropriate level.   There may be quite a lot of money sitting in that cupboard that could be working better for you.  You also require a system for using up what’s in the stock cupboard.  Perhaps you order less.  Better still, you may include a current stock check into your routine when pricing a job and ordering materials.

Making the Most of Trends - a Case Study

 The other process for useful information is comparison.  Comparison of this month with the same month last year will show whether things are getting better or worse but will also provide clues to what might be causing the trend.

In the following case study, Martin started his hairdressing business in January 2010 and in mid-2011 is analysing his receipts for the first 14 months he has been in business.  He can see some important trends:



Jan 2010   
























Jan 2011




At the beginning of 2010, receipts were very low.  This was the beginning of business and people did not know him or his work.  He didn’t have much advertising working for him and his main custom came from family and friends and a few people who transferred with him from his previous salon.  It is common for new businesses to struggle for a couple of years while they get known and build up a clientele.

There is a steady growth from the beginning as the figures show an upward trend, although June, July and August seemed low and January 2011 showed a big drop from the months on each side.  In comparison, November and December 2010 jumped upwards very satisfactorily.

When Martin compares the two Januaries they both show low takings, so it may be that the starting low figure was affected by more than just being a new business.  It may be that January will generally always be slow.  He will need to take that into account when planning for future years.   It’s not a good idea to just charge a little more to cover the drop in work as it will alienate customers who have become used to the charges and expect them to stay the same.  Changing charges requires advance notice and extra publicity.    It is better to identify why the sales are down and encourage more people to come in.  If he offers a ‘post-Christmas discount’ he may be able to attract more customers in during that month.

In contrast, his sales immediately pre-Christmas have jumped upwards.  He reviews who came in during those months by checking his appointments book, remembering he was run off his feet, and finds that his older female customers flocked in to ‘have their hair done for Christmas’, while the young children and teens were less in evidence.  The customer mix, and the type of hairdressing that was required by them, would account for the increase in sales.  He can continue to expect a pre- Christmas boom if he maintains satisfaction for these customers and can keep them coming back. 

During summer his sales fell slightly.  His appointment book reveals more white space than usual, showing that he had times when no one was in the salon.  He remembered hearing a lot of holiday stories in the following months and realised that many of his regulars had been away and missed having their hair done with him.

In reviewing his expenses, Martin found high expenditure in December compared with the other months.  His invoice file showed that he had ordered in extra quantities of shampoos, conditioners, waxes and hairsprays.  He remembered that with all the extra business, he had run out of some products and had been forced to shop around for emergency supplies.  This had been more expensive than his usual suppliers, on top of being extra orders.  He made a note to stock up more in October so to be ready for the rush this year.

Overall, Martin was able to conclude that the business was generally good, although there was still plenty of room for more growth.  He would introduce a post-Christmas discount to see if he could entice more people through the door in January.   During the summer period he probably would still have a drop-in business, but he might be able to run a promotion for new customers.  He could also try attracting his regulars – and perhaps others – with a ‘look good for the holidays’ promotion just before they go away.  He would order in extra stocks of his consumable items ready for the pre-Christmas rush.  If he doesn’t sell as much as he expects, he could use the leftover extras for his post-Christmas promotion and sell them at a discount.

In this case study, Martin is identifying, and dealing with, seasonal trends that will affect his profitability.  By looking at the year as a whole, and comparing the months between years, he can see where his ups-and-downs relate to the time of year and plan accordingly.  Seasonal trend is only one factor among many that make a difference to your sales.  Depending on what you are selling, you may need to deal with fashions, new technologies, an event in the celebrity world, the impact of a new television program or film, a new law or regulation, an unusual weather pattern, a faulty product that lets you down, major job losses in your area limiting people’s spending, or something new that has never happened before.

The most successful businesses keep an eye on what’s happening, analyse why sales are dropping or increasing, drill down into the documents that are part of the daily process (such as appointment books and invoices), and find answers that they can then use to continue reducing expenses and increasing sales.  It’s not difficult to do, but if you need help – or just another point of view – your accountant is a useful resource in analysing the figures.  It will need your valuable knowledge of the daily business, however, to understand the underlying reasons and what might be done to address a potential problem. 

 It is up to you, as the business owner and manager, to keep an eye on the numbers, to measure progress regularly, and to address trends that are affecting your sales.

Automate Your Business to Grow!

By Randall Orser | Small Business

Mention "business process automation" and for most people, it’s the complex IT systems of the bigger business establishments that first come to mind. Yet the smaller businesses, even the start-ups and home-based enterprises, can make use of and benefit from business process automation.

What is Business Process Automation?

Business process automation refers to the use of technology and software applications in operating a business. It is the complete or partial automation of repetitive tasks and regular business processes so that labour is better utilized and costs are contained.

Tools to automate a business are aplenty: tools for accounting, inventory tracking, email marketing, order taking, customer relations, and many more. A good example is the automation of inbound calls to a company. Do you remember years ago when a telephone operator was a must for most firms? These days, callers interact with a voice response system that takes care of standard calls or inquiries and routes specific calls to the right person or department.

Benefits of Automating Your Home Business

Automation has become necessary for businesses of all types and sizes. Consider the following benefits you are bound to gain by automating your business processes:

1. Business process automation will save you time.

If you are a one-person operation, you can be freed from handling the everyday routine tasks and devote your time instead towards marketing and growing your home business.

2. Business process automation will cut down your costs.

By automating many of your processes, you can streamline your operations so you will not need to hire as many employees as you would if your operations were run manually.

3. Business process automation will minimize errors.

Human errors can be costly and can lead to financial losses or poor customer service. Automated accounting systems, for instance, guarantee accuracy in computations, ensure timeliness of sending billing statements and improve the efficiency of your inventory management.

4. Business process automation will help you manage information better.

As business owner, you need to be informed about all aspects of your business operation. With automation, information is sorted, classified, and ready for your retrieval anytime you need it.

5. Business process automation will facilitate communication.

With correct and timely information, you get to know exactly what your customers want. You can communicate directly with your customers to address their needs or resolve their problem with your product or service.

How You Can Automate Your Home Business

If you are not yet sure which of your business processes to automate and what automation tools to use, you may want to take stock of your various business processes and learn which can be automated. Make sure to break them down where needed so you can decide on the appropriate software or application.

Take for example your marketing process. You can break it down to the following tasks: generating leads, distributing marketing materials, sending out sales letters, following up on leads, conducting surveys, and gathering feedback. For lead generation, you can design your website to include a subscription form or an opt-in box where visitors can submit their contact information. The pooled data go to your mailing list, which you then feed to your email auto responder that will in turn generate automatic responses to the email inquiries or send out pre-scheduled messages, newsletters, or sales pitches to those in your customers’ list.

With the right apps on your website, you can engage in e-commerce and run your online store where everything is automated from the order taking to receipt of payment and processing of shipment. If you have affiliates or if you advertise on other websites, you can also monitor their performance using a tracking system. Your accounting system can incorporate bookkeeping, invoicing, inventory management, payroll, voucher preparation, and so forth.

In the end, it is a matter of identifying the unique needs of your business and choosing the appropriate business process automation tools. Depending on your budget and the degree of automation that you want, you can hire an IT professional to develop an automated system for you or you can purchase one of the many canned programs that are readily available. A few solutions that you can download for free are available if your needs are simple and your volume is low.

How Smart Entrepreneurs Manage Inventory

By Randall Orser | Small Business

Inventory management isn't exactly made for the highlight reel. When people think of entrepreneurs, they think of bold ideas, trailblazing, and making money, not counting how much of your product you have. But inventory management is as important as accounting or securing your patents. Not enough of your big product to go around? Too bad, you just lost a chunk of your customers. The two basic things that your product needs to be are "functional" and "available for purchase". Fail the second one and it doesn't matter how good your product is - you're going to lose money.

Proper inventory management involves more than good hiring practices and keep an eye on your products. There are a couple of problems you'll need to solve.

1. Tracking Your Inventory

The Problem: So you know how much you expect to sell. The problem then becomes figuring out how much you have available for sale. Human error can put the kibosh on your finances. Inventory miscounts can occur when they're sold, when they're received, or when someone decides to use their five-finger discount. You'll also have to take scrapped items into account.

The Solution: Bar codes and electronic data interchange can help make sure that everything is accounted for. While you can count your inventory daily, it can put your employees and your finances under severe stress. A good alternative is to count a few items at a time. Pick a few of your products and see if they match your records. Put more emphasis on your best sellers - count them more often.

2. Having Too Much

The Problem: Too much of a good thing can be a bad thing. Making too much product can result in storage and production costs eating into what could be your profit. Anything that sits on a shelf for long enough is at risk of being stolen, damaged, or even becoming obsolete. Old product is notoriously difficult to sell, which can result in unplanned discounts or hoping that the overseas markets have room for your old stuff.

The Solution: The first thing you should do is figure out how much you need to have and when you'll need to have it. Take a look at how your sales have been over the past year. Take note of any peaks and dips and figure out if those deviations are connected to specific events or seasons. You can also figure out if you have spikes during specific times of the month, such as at the end of the month.

3. Data Loss

The Problem: Your inventory is properly marked and recorded and you're ready to turn in when your computer suddenly shuts down and refuses to turn back on. You get the repair guy to come in, and he tells you that your hard drive is gone. What do you do?

The Solution: There are a lot of things that can compromise your data, from viruses to theft. So when the inevitable "bad thing" does happen, take a deep breath. Take a look at your backup copy, which you should have. When you update your main file, make sure to update the backup as well. Software is available to both automate the process and to make sure that your data is recoverable. You can also have another copy of the file available to someone who needs it regularly, such as your accountant.

4. Skewed Priorities

The Problem: Inventory checking, for the most part, is a manual task. Someone has to visually confirm the existence of your products and note it down. This takes a lot of time and effort, both of which increase as your company grows.

The Solution: Entrepreneurs know that the first thing to do when solving a problem is to figure out your priorities. In this case, the priorities should lie in your most important products. Figure out how your best items are doing inventory-wise. Make sure that they're always in stock and up-to-date. Then take a look at your second-best items and so on and so forth. While it is possible to cover all your bases, focus on making sure that the most important products are protected. Your resources and your personnel are not unlimited.

5. Misused Spreadsheets

The Problem: Spreadsheet programs are often used as a way to easily track inventory. Microsoft Excel and OpenOffice software are used as computer lists. The problem is that computer files can be lost or modified. Changes are difficult to track, and synchronizing files across multiple branches can drive you to insanity.

The Solution: Entrepreneurs know that you have to use the right tool for the right job. Go with accounting software that has built-in inventory management systems, such as Quickbooks Online (QBO); maybe use an app for inventory that links to QBO. They'll ensure that human error is minimized and even provide vital functions such as a centralized database.

Your inventory might not be the most exciting thing in your life as an entrepreneur, but it's no less important. Mismanaged stock can easily result in lost sales, lost customers, and lost profits. Keep an eye on your product no matter how boring it gets and it will pay off.

A Formula for Disaster

By Randall Orser | Small Business

A majority of family-owned businesses have no succession plan to deal with retirement, disability or death. The cost of such negligence is often steep.

Except for the most bitter divorces or hotly contested lawsuits, nothing else comes close to the intense emotions and complex challenges of engineering a succession plan for a family business. That’s precisely why so few owners actually engage in the process. Only 30 per cent have a succession plan in place, according to a 2007 study by wealth management firm Laird Norton Tyee.

Even for those who do, tiptoeing through the minefield of succession planning leads to disaster more often than triumph. Just 30 per cent of family enterprises survive a second generation of stewardship, according to the Family Firm Institute (FFI). A scant 12 per cent make it through a third generation.

 “The biggest issue with succession planning is recognition of the need and a sense of urgency around doing it,” says Beth Wood, assistant vice president at Springfield, MA-based MassMutual Financial Group and supervisor of another 2007 study, co-sponsored by FFI. “Our data, based on responses from 1,035 family businesses with at least $1 million a year in revenues, suggest that almost 75 per cent of business owners are within 10 years of retirement, but have not selected a successor or put a succession plan in place,” says Wood, who runs the succession planning practice at MassMutual. “In addition, 30 per cent of the owners have no estate plan in place beyond a will. That is a concern because in our last survey, in 2002, only 19 per cent had no estate plan beyond a will. So the problem is getting worse.”

For any successful privately owned enterprise, estate taxes represent the single biggest threat to long-term well-being if not handled properly, says M. Katharine Davidson, a partner at law firm Dreier Stein Kahan Woods George, LLC in Santa Monica, CA. In Canada, probate taxes can be quite high depending on the value of the estate. As a result, one of the most important goals of a succession plan is to dramatically reduce estate tax exposure.

Expensive misconceptions

Many business owners mistakenly believe they have effectively addressed succession because they do, in fact, have an estate plan. “There is a huge misconception about what a succession plan is, which is why so many people do not have one,” says Ricci Victorio, vice president and a partner-director at 35-year-old succession planning firm The Rawls Group in Fairfield, CA.

“Most business owners do not really understand what a succession plan entails. Many owners think, ‘I have a buy/sell agreement, I’ve got a will, I’ve got a trust.’ Those are standard estate-planning tools. However, what they have overlooked is whether they have trained a successor and whether they have one in place. And they have not asked themselves whether they have managers and the bench strength to carry that successor into the next generation, or whether they’ve provided a way for their successor to inherit, buy or earn the stock so they have a smooth transition of ownership.”

There are also emotional and psychological reasons why so many business owners fail to tackle the issue. “People don’t like to deal with their own mortality, so they don’t like to do succession planning,” Davidson says. “They often also don’t want to deal with some of the hard questions about how to treat family members. There are always relationship issues at hand and they don’t want to disrupt family harmony. And people are so busy running their business, because that is what has made them successful, that they don’t take the time to look to the next step.”

The consequences of such neglect can be very expensive, says David Mahmood, founder and chairman of Dallas-based investment banking firm Allegiance Capital Corporation. “Lack of a succession plan can literally destroy your business,” he says. “So, no matter your age or how good your health is, you need to have a plan in place. Nobody gets out of bed in the morning and expects not to make it through the day because they will get killed in a highway accident or drop dead of a heart attack.”

David Auchterlonie, chairman and CEO of corporate turnaround management firm The Scotland Group in Newport Beach, CA, has witnessed the carnage poor succession planning can inflict. Of 200 cases he has handled over the past 22 years, about one-third have involved family-owned businesses. Of those, succession issues have invariably been at the core of the problems the businesses faced.

“The most common issue is the inexperience or the lack of capability of the designated – or designated by default – successor,” says Auchterlonie. For example, he cites a $100 million distributorship whose owner died suddenly. His eldest son, who held an MBA degree of dubious practical value, took over the company and proceeded to offer deep discounts to its best customers. That, in turn, eroded the company’s financial performance and led to a desperation sale at a fire-sale price.

Victorio agrees with Auchterlonie that a less-than-competent successor, often enabled by a sense of entitlement and the failure of rank-and-file management to expose to the owner his or her lack of qualification for the heir apparent role, is a common problem. Facing it is also among the most emotionally wrenching aspects of succession, she adds.

Yet another emotional issue, one that is often ignored, the experts say, is that the son or daughter or other family member designated as successor actually does not want the job, but a lack of communication or pressure from a parent facilitates an unfortunate circumstance that quickly becomes a catalyst for failure.

As a result, Victorio says, a growing trend is a “succession bridge,” meaning that the plan skips a generation but keeps the business in the family. Typically, an outside CEO is recruited to run the business while a grandchild completes business school and then works in a training or mentoring program under the tutelage of the interim executive until he or she is ready to assume command.

But if in doubt about the existence of a competent successor who has the requisite ambition and drive to shoulder the long-term burden of a business, the best course is usually to sell the company at the peak of its value, the experts say.

Meeting the challenge

More than anything else, perception and attitude determine the success of a succession plan. “The important thing to understand is that succession planning is a process,” says Victorio. “It is not a project. It does not have an end date.”

Key components of a solid plan include a realistic understanding of where the business is today – its strengths and weaknesses – and where the owner wants it to go, as well as a careful assessment of who is the best successor. Often, that means looking outside the family or current management team.

But the grand tradition is for a capable successor to carry on for the family and build the value of the company. Sumita Batra, CEO of Ziba Beauty, a chain of specialty salons in southern California, has endured a succession process for the past four years. Since she took over four years ago, a partnership that includes her mother – the founder of the business – husband, sister and brother has successfully doubled the size of the company, from six stores to 12.

The most important lesson Batra has learned, in going through a transition she acknowledges has been difficult at times, is that a family bond and shared trust are more important than anything else. “Blind trust must exist between the family members to come out of a process like this without damaging your family relationships,” she says. “And you have to put the emotion aside. What I learned is that you can go through a very, very tough experience and instead of getting distant, you can actually become even closer. And the business can grow and become even more successful.”

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