Category Archives: Articles

Minimize Risk and Maximize Success With a Business Plan

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Darrell V. Arne

Darrell V. Arne, Consultant

Running a business without a management plan is like embarking on a long road trip without a map: You might reach your destination eventually, but not without wasting time and money on unnecessary detours, dead-ends and delays.

Planning and controlling are the two legs on which a well-managed company stands. Planning involves setting goals, determining how to reach them and, finally, doing what’s necessary to attain those goals. Controlling involves putting the plan in motion and monitoring its progress over time.

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Hard Times Are Here, but Survival Is Possible

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Paul F. Goblet, Financial Advisor, NMSBIC

Paul F. Goblet, Financial Advisor, NMSBIC

When free markets are in free fall, the federal government can intervene and keep the country and economy running by simply printing more money and running a deficit. That’s what lawmakers chose to do last fall to shore up collapsing financial markets.

Small businesses don’t enjoy such powers. They can’t print their own money, and most realize that running a business in the red is risky even in the short term.

Businesses owners face unprecedented challenges in today’s far-reaching recession. Many are being forced to reevaluate where they stand and where they hope to be in the future, and some are being forced to ask for help from consultants or lenders, even though the prospect is embarrassing to them.

Grim reapings

Most businesses in New Mexico have fewer than 25 employees, and most of these are owned and financed by the founder and family members. Their growth depends on the business’s success and financial stability; when one or both of these are threatened, the business often loses its ability to get credit at affordable terms.

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Doing the Right Thing – Even When No One Is Watching

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Julianna Barbee, Director, NMSBDC at Northern NM College

Julianna Barbee, Director, NMSBDC at Northern NM College

It took a collapsing economy to expose the moral bankruptcy of entrepreneurs like Wall Street investor Bernard Madoff, who was arrested recently on suspicion of defrauding clients of $50 billion in a Ponzi scheme. If such practices were part of the business landscape at a time of relative prosperity, even greater lapses of ethical behavior and judgment may be likely now as many businesses struggle to remain solvent during what is expected to be a protracted and painful recovery.

While hard times drive some people to criminal and amoral extremes, others remain faithful to core principles or values that determine their conduct regardless of external circumstances. These principles, or ethics, are what separate people of integrity from people who disregard any law or agreement or courtesy that interferes with making a buck.

Ethical business practices bring their own rewards by raising the performance and reputation of those who practice them. Businesses that set ethical guidelines and promote ethical behavior are demonstrating that honesty, respect and safety aren’t expendable when times are tough. Businesses that are willing to go beyond the minimum legal requirements of the market and to hold themselves and their employees to a high standard of moral behavior are bright spots in a gloomy economy.

Here’s how a business can start building an ethical foundation:

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Finding the Fuel to Keep Going in a Stalling Economy

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Paul F. Goblet, Investment Advisor, NMSBIC

Paul F. Goblet, Investment Advisor, NMSBIC

New Mexicans who hoped that the Treasury Department’s Troubled Asset Relief Program would benefit small businesses by making it easier and cheaper to obtain credit are finding that only a few of the nation’s largest banks received infusions of taxpayer-financed capital — and the ones that did seem reluctant to part with it.

Instead, the state’s businesses are finding lenders reducing or withdrawing credit lines in reaction to the nationwide economic slowdown and to fears that local businesses will suffer from reductions in retail and government spending.

Web of woes

When the word recession is used frequently enough, everyone begins to believe it. Workers assume their jobs are in jeopardy so their families spend less and save more, and this has a dramatic impact on the economy. State and local governments cut programs as tax revenues fall, and banks tighten credit standards, reduce credit availability, and sometimes stop lending.

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Going to Work by Staying at Home

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Roberta Scott, Director, NM Small Business Development Center at UNM-Valencia

Roberta Scott, Director, NM Small Business Development Center at UNM-Valencia

Frequent reports of massive nationwide layoffs and ongoing anxiety about the economy are making more people wonder if this is the year to start controlling their own financial destinies by starting a business that’s compact enough to run from home, especially since cell phones, computers, the Internet and faxes make it easy to conduct business with potential clients and suppliers.

Advances in communications and office technology and the ongoing shift from a manufacturing to a service economy are among the many forces remaking Americans’ assumptions about work. Many workers are weary of the congestion, road rage, weather-related dangers and time loss that make commuting such a grind. Working parents often want more time with their children than they have when employed outside the home for someone else.

And while many workers are grateful just to have a job in a time of growing unemployment, others want more from work than just a steady paycheck and benefits — especially those who have lived through past downturns and are tired of forgoing raises and watching benefits erode as their employers struggle to survive. They want work that is challenging, interesting and fulfilling, and they want control over their time, their work and their health.

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Recession Makes Business-Plan Revisions Imperative

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J. Roy Miller, State Director, NM SBDC Network

J. Roy Miller, State Director, NM SBDC Network

It’s a safe assumption that most of the companies doing business today didn’t include recession-survival tactics in their plans for 2008-2009. This means that the assumptions underlying their business plans are probably outdated, even for companies launched just a few months ago.

That’s how quickly things can change in a global economy buffeted by unstable financial markets, tightened credit and faltering consumer confidence. And that’s why forward-thinking companies maintain their advantage by having and progressively updating a written business plan.

For some businesses, the dramatic scenery change of a deepening recession means that the sales assumptions in their original business plans are now overstated and unrealistic. Other businesses — the lucky ones that stand to profit in a slow economy — have business plans that understate their possibilities for expansion and revenue growth. Either approach — over-reaching or under-reaching, based on an invalid business plan — could endanger the unwary business owner.

To increase the chances of surviving this financial winter, companies should revisit the long-term and short-term portions of their business plans and adjust in light of changing circumstances. Those in charge should consider the following:

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Realistic Expectations Are Central to Obtaining Capital

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Paul F. Goblet, Investment Advisor, NM Small Business Investment Corporation

Paul F. Goblet, Investment Advisor, NM Small Business Investment Corporation

Finding the money to run a business is a concern that begins at conception and doesn’t stop until the business fails or is sold to someone else. Satisfying a healthy business’s appetite for capital requires knowing which kinds of investors to approach at each stage of a company’s growth and what size of investment to expect at each stage.

Each funding source has its own guidelines for when to help — and how much to give — a company that’s hungry for capital. But the first thing all investors want to know is what stage a company has reached and what chance it has to grow and make money.

Few businesses follow a predictable path and timeline from one stage of life to the next. Some linger for a long time as startups, while others dash directly from startup to exit. Knowing the life cycle of a typical business can help an entrepreneur know where to find capital to reach the next stage.

Life cycle of a business

The seed or startup stage starts with an idea or a prototype for a product or service. At this stage, entrepreneurs either tap friends, family members or other personal contacts for funds, or they seek angel investors, grants, micro loans or venture capital.

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The Seven Deadly Sins of Marketing and Sales

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Pat McNamara, Marketing Consultant

Pat McNamara, Marketing Consultant

Failure to listen to potential customers or clients has sabotaged many a great idea or product, especially among entrepreneurs who lack empathy and act as if they know all the answers. Such a self-centered approach to doing business is bad enough when the economy is booming, but it’s fatal during a recession, when thinking about the other guy is essential.

Self-centered assumptions lead some entrepreneurs to commit one or all of these seven deadly sins of marketing and sales:

It’s all about me. “I may not be much, but I’m all I think about.” That slogan on a young man’s T-shirt caught my eye on a recent business trip, as did a similar pronouncement on the T-shirt of a woman in my hotel lobby: “It’s all about me.” Extreme self-consciousness underlies stage fright and is a barrier to successful sales. When a speaker or salesperson genuinely wants an audience or individual to understand a concept or make the right purchase, self-consciousness vanishes.

We are so much alike. In truth, we are all very different — in the things we value, how we think and make decisions, the speed with which we walk and talk. Some of us value relationships and strive for collaboration. Others focus on results. Some people make instant decisions, while others ponder for weeks. Appreciating diversity is critical to tailoring a sales pitch.

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Hard Times Are No Time to Stop Marketing

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Julianna Barbee, Director, New Mexico Small Business Development Center at Northern New Mexico College

Julianna Barbee, Director, New Mexico Small Business Development Center at Northern New Mexico College

Marketing is essential to the growth and success of any business, yet it seems to be the first part of the operating budget that managers slash when revenues dwindle and the economy gets unpredictable. Understanding and appreciating the role of marketing can prevent business owners from making the mistake of viewing this type of outreach as a dispensable luxury.

Whether you conduct business in a small, rural area or the global market, some principles are universal:

Marketing is all about the customer. To meet your customers’ needs you have to know those needs and know how your products or services will help them. Figure out ways to communicate with customers and persuade them to choose your services or products through creative marketing.

Standing out amid the information-overload din. On any given day, people are exposed to thousands of marketing messages through advertisements on TV, radio, billboards, newspapers, magazines and the Internet. To win the competition for your customers’ overtaxed eyes, ears and wallets, your message has to stand out amid all these appeals, and that requires creativity, a marketing budget and careful consideration of your target market and the best media channels to reach it.

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Recession-Proofing Your Business Requires Back-to-Basics Strategy

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Julianna Barbee, Director, New Mexico Small Business Development Center at Northern New Mexico College

Julianna Barbee, Director, New Mexico Small Business Development Center at Northern New Mexico College

With the crisis in America’s financial markets now metastasizing around the globe, many entrepreneurs are making a return to business basics part of their strategy for survival. Among these essentials are a determination to succeed, a positive attitude, flexibility and willingness to act quickly and decisively.

Here’s a more specific look at some core principles and how they can be applied to your business:

Productivity. Never stop thinking of how to increase productivity. Increasing return on equity means increasing the financial results and outputs relative to costs and inputs. Look for ways to increase sales, revenues and profits at lower costs.

Customer satisfaction. Be clear about how your customers define satisfaction, and know what they really want, whether it’s speedy service, quality service or access to those in charge. Every business has both external and internal customers, and satisfying these people is indispensable to success. If your customers are happy, they will buy from you again or use your services again, and they’ll tell their friends about you.

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