Monday, March 12, 2012

6 tips for budding entrepreneurs

My business partner and husband, Kurt Johnson, manages the brand for our company. He had a blog entry recently that I thought spoke to the challenges of small business owners that I wanted to share with you as I think it is insightful. Here goes:

I started this business in July of 2002. I had a great corporate job as a marketing consultant of sorts and traveled weekly giving advice to large corporations. It paid well, but I had the fear that come age 50 I’d be laid off and unemployable. There would be a younger, sharper guy to take my place at a fraction of the cost. In retrospect I was probably right. The recession was just the excuse for many companies to cut expensive mid-level executives with high salaries. Well, I decided 10 years ago to make the plunge and start my own business.

My buddy said that in the first 2 years of having your own business, you cry, "Why did I ever do this?" But after the first 2 years, you say, "Why didn't I do this sooner!" All true. Anyway, in those 10 years here are 6 tips for success.

1.Write a Great Business Plan for Your Worst Critic:I love to come up with new business ideas. The trouble is often that I love the business idea too much. The next step after getting excited is to sit down and write it out. The process gets you to the next level of definition and proof. Search online for a business plan outline. Keep it simple and short, but be ultra detailed. Bring it too your worst critic with a good analytical mind (a banker?). Then listen. Try to fall out of love before making any final de cision.

2.Realize that Despite Your Worst Fears, You are now a Salesperson:
You will need to sell your business plan to your spouse, to your friends, then to your banker or investors before you even get started. Then you will need to sell your product to customers. Even if you plan to hire sales people, you need to manage and help them sell. Sales are the least understood and most important aspect of business. No one wants to be a salesperson, they don't teach it in business school (at least not mine), but you’ll never be successful without the ability to actively solicit prospects, get them excited in your product, and create and close a sales agreement.

3.Make Marketing a Tested Machine:Most business owners will need to advertise, or market, or create a sales force. You can only get so big with referrals, word of mouth, or social networking. When you're relying on direct mail marketing to bring in leads, you can easily see the relationship between marketing and sales, but when you have a highway billboard it's much harder. The relationship though is still the same: marketing brings in leads and without leads there are no new sales. The kiss of death for many businesses during the recession was to cut mar keting. The good ones knew that you needed to do the opposite; in a down economy leads are more costly. Even though billboards or other mass media are hard to quantify, do some analysis to figure it out. Did your sales improve? How much? What was the approximate return on investment? If it didn't pay off, try something new and keep trying until you get that tested Marketing Machine.

4.Have a Monthly P&L that your 13-Year-Old Understands:I am a business owner, but I still can't decipher the financial reports generated through QuickBooks. So I have my Controller put the information into an easy annual spreadsheet, broken down by month, which shows sales, operating expenses, marketing and sales expenses, and general and administrative expenses. I can compare monthly numbers to previous months or last year's. It's easy to understand and communicate, and it shows very easily where we're screwing up. I know quickly if my labor is too high, my marketing is off, or my sales sucked and I didn't react fast enough to cut expenses.

5.Create Processes, Document Processes, Measure Processes, and Communicate Processes:

As you grow, you'll hire and train more employees. Those same employees will learn their job, and then over time decide to do things their own way. Eventually, with each employee doing their own thing, you will have a product that is inconsistent. Your quality will suck. Create training and process manuals, and then manage to those manuals. Find a way to measure the process and the quality of the product. Reward your employees for exceeding targeted quality and process goals. We give our employees a production bonus. They get a flat percentage of sales in a monthly fund. We subtract from the fund the cost of any re-prints based on poor printing quality or processes not followed. It's great to pass out cash each month for processes followed correctly.

6. Communicate with Your Employees, Your Spouse, Your Partner, Your Best Buddy, and then Someone You Really Trust: Employees get weird, paranoid, disgruntled, misunderstood and generally unhappy if you don't have regular meetings. Read that old book, The One Minute Manager.Try to touch each of the employees you manage as frequently as possible throughout the day if only for a minute. On the other hand, you can get weird, paranoid and unhappy yourself. I try to communicate business issues to people outside of work. Sometimes they get it and sometimes they don't, but the process can give you a sort of emotional release and perspective. And sometimes you get some good advice that helps you in your business. That product bonus idea? From my best buddy.

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