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Survival Tips 4 Small Business


Long before the cash flow in a business, large or small, starts to tighten up, the money management of that business has to be run as a "tight ship." Some of the things you can and should do include protecting yourself from expenditures made on sudden impulse.

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									    Enterprises & Entrepreneurs ®
          Survival Tips for Small Businesses

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Part I: Strategic Considerations-


You may be in Mail Order, Direct Mail, E-Mail/E-Zine Marketing, or
you may be a local merchant with 150 employees; whatever the case-
you've got to know how to keep your business alive during economic

Long before the cash flow in a business, large or small, starts to
tighten up, the money management of that business has to be run as a
"tight ship." Some of the things you can and should do include
protecting yourself from expenditures made on sudden impulse.

We've all bought merchandise or services we really didn't need simply
because we were in the mood, or perhaps in response to the flam-
boyancy of the advertising or the persuasiveness of the salesperson.

Then we sort of "wake up" a couple of days later and find that we've
committed hundreds of dollars of business funds for something that's
not essential to the success of our own business, when really
pressing items had been eagerly waiting for those dollars.

If you are incorporated, you can eliminate these "impulse purchases"
by including in your by-laws a clause that states: "All purchasing
decisions over (a certain amount) are contingent upon approval by the
board of directors."

This will force you to consider any "impulse purchases" of serious
cost, and may even be a reminder in the case of smaller purchases.

If your business is a partnership, you can state, when faced with a
buying decision, that all purchases are contingent upon the approval
of a third party. In reality, the third party can be your partner,
one of your department heads, or even one of your suppliers.

If your business is a sole proprietorship, you don't have much to
worry about really, because as an individual you have three days to
think about your purchase, and then to nullify that purchase if you
think you don't really need it or can't afford it.

While you may think you cannot afford it, be sure that you don't
"short-change" yourself on professional services. This would apply
especially during a time of emergency.

Anytime you commit yourself and move ahead without completely
investigating all the angles, and preparing yourself for all the

contingencies that may arise, you're skating on thin ice.

Regardless of the costs involved, it always pays off in the long run
to seek out the advice of experienced professionals before embarking
on a plan that could ruin you.

1244 Stock Category Advantages-

As an example, an experienced business consultant can fill you in on
the 1244 stock advantages. Getting eligibility for the 1244 stock
category is a very simple process, but one with tremendous benefits
to your business.

The 1244 stock encourages investors to put equity capital into your
business because in the event of a loss, amounts up to the entire sum
of the investment can be written off in the current year.

Without the "1244" classification, any losses would have to be spread
over several years, and this, of course, would greatly lessen the
attractiveness of your company's stock. Any business owner who has
not filed the 1244 corporation has in effect cut himself off from 90
percent of his prospective investors.

Getting “Hard-Nosed”-

Particularly when sales are down, you must be "hard-nosed" with
people trying to sell you luxuries for your business. When business
is booming, you undoubtedly will allow sales people to show you new
models of equipment or a new line of supplies; but when your business
is down, skip the entertaining frills and concentrate on the basics.

Great care must be taken however, to maintain courtesy and allow
these sellers to consider you a friend and call back at another time.

Your company's books should reflect your way of thinking, and whoever
maintains them should generate information according to your

Thus, you should hire an outside accountant or accounting firm to
figure your return on your investment, as well as the turnover on
your accounts receivable and inventory. Such an audit or survey
should focus in depth on any or every item within the financial
statement that merits special attention.

In this way, you'll probably uncover any potential financial problems
before they become readily apparent, and certainly before they could
get out of hand.

Further Considerations-

Many small companies set up advisory boards of outside professional
people. These are sometimes known as Power Circles, and once in
place, the business always benefits, especially in times of short
operating capital.

Such an advisory board or power circle should include an attorney, a
certified public accountant, civic club leaders, owners or managers
of businesses similar to yours, and retired executives.

Setting up such an advisory board of directors is really quite easy,
because most people you ask will be honored to serve. Once your board
is set up, you should meet once a month and present material for

Each meeting should be a discussion of your business problems and an
input from your advisers relative to possible solutions.

These members of your board of advisers should offer you advice as
well as alternatives, and provide you with objectivity. No formal
decisions need to be made either at your board meeting, or as a
result of them, but you should be able to gain a great deal from the
suggestions you hear.

You will find that most of your customers have the money to pay at
least some of what they owe you immediately.

To keep them current, and the number of accounts receivable in your
files to a minimum, you should call them on the phone and ask for
some kind of explanation why they're falling behind.

If you develop such a habit as part of your operating procedure,
you'll find your invoices will magically be drawn to the front of
their piles of bills to pay.

While maintaining a congenial and courteous attitude, don't hesitant,
or too much of a "nice guy" when it comes to collecting money.

Building the Strength of Your Stay Power-

Something else that's a very good business practice, but which few
business owners do is to methodically build a credit rating
with their local banks.

Particularly when you have a good cash flow, you should borrow $100

to $1,000 from your banks every 90 days or so. Simply borrow the
money, and place it in an interest bearing account, and then pay it
all back at least a month or so before it's due.

By doing this, you will increase the borrowing power of your
signature, and strengthen your ability to obtain needed financing on
short notice.

This is a kind of business leverage that will be of great value to
you if or whenever your cash position becomes less favorable.

By all means, join your industry's trade associations. Most of these
organizations have a wealth of information available on everything
from details on your competitors to average industry sales figures,
new products, services, and trends.

If you are given a membership certificate or wall plaque, you should
display these conspicuously on your office wall. Customers like to
see such "seals of approval" and feel additional confidence in your
business when they see them.

Often Overlooked-

If at all possible, you should have your spouse work in the business
with you for at least three or four weeks per year.

The important thing is that if for any reason you are not available
to run the business, your spouse will be familiar with certain people
and situations about your business.

These people should include your attorney, accountant, any advisors
or consultants, creditors and your major suppliers. The long-term
advantages of having your spouse work four weeks per year in your
business with you will greatly outweigh the short-term inconvenience.

Many couples share responsibility and time entirely, which is in most
cases even more desirable. Whenever you can, and as often as you need
it, take advantage of whatever free business counseling is available.

The Small Business Administration published many excellent booklets,
checklist and brochures on quite a large variety of businesses.

These publications are available through the U.S. Government Printing
Office. Most local universities, and many private organizations hold
seminars at minimal cost, and often without charge. You should also
take advantage of the services offered by your bank and local

The important thing about running a small business is to know the
direction in which you're know on a day-to-day basis
your progress in that very direction [your dynamic Business/Marketing

Be aware of what your competitors are doing and practice good money
management at all times.
All this will prepare you to recognize potential problems before they
arise. In order to survive with a small business, regardless of the
economic climate, it is essential to surround yourself with smart
people, and practice sound business management at all times.

The Misconception About Business In The Summer-

Whoever started the nasty rumor that Mail Order business is very slow
during the months of July and August is dead wrong. In case you are
new to the world of Mail Order you are likely to believe this rumor.

The sad part is that a lot of people in the business really believe
it! Why do they believe it? Because they have been told by someone
else and the rumor was considered "gospel" - so that someone told
someone else and so on- sound familiar?!?

What people don't realize is that there is no foundation to this
rumor. The only reason the mail order business MAY slow down in the
summer months is because of the nature of the product being sold. Try
selling winter clothes in July!

Some people will go so far as to stop advertising during the summer
months because they are convinced they won't get any sales. Because
of the drop in revenue for publishers, due to this line of thinking-

Everybody suffers and they keep the rumor alive and true. Only people
believing this lie are making it happen.

Part II: Personal Considerations-

Before You Start-

Starting a business is risky at best; but your chances of making it
go will be better if you understand the problems you'll meet and work
out as many of them as you can before you start.

Here are some questions and work-sheets to help you think through
what you need to know and do. Check each question if the answer is
YES. Where the answer is NO, you have some work to do.

How About You?

  ✔   Are you the kind of person who can get a business started and
      make it go? (Before you answer this question, use the worksheet

  ✔   Think about why you want to own your own business. Do you want
      to badly enough to keep you working long hours without knowing
      how much money you'll end up with?

  ✔   Have you worked in a business like the one you want to start?

  ✔   Have you worked for someone else as a foreman or manager?

  ✔   Have you had any business training in school?

  ✔   Have you saved any money?

How About the Money?

Do you know how much money you will need to get your business

Have you counted up how much money of your own you can put into the

Do you know how much credit you can get from your suppliers--the
people you will buy from?

Do you know where you can borrow the rest of the money you need to
start your business?

Have you figured out what net income per year you expect to get from
the business? Count your salary and your profit on the money you put

into the business.

Can you live on less than this so that you can use some of it to help
your business grow?

Have you talked to a banker about your plans?

How about a partner? If you need a partner with money or know-how
that you don't have, do you know someone who will fit--someone you
can get along with?

  ✗   Do you know the good and bad points about going it alone, having
      a partner, and incorporating your business?

  ✗   Have you talked to a lawyer about it?

How About Your Customers?

     Do most businesses in your community seem to be doing well?

     Have you tried to find out whether stores like the one you
      want to open are doing well in your community and in the rest of
      the country?

     Do you know what kind of people will want to buy what you plan
      to sell?

     Do people like to live in the area where you want to open your

     Do they need a store like yours? If not, have you thought about
      opening a different kind of store or going to another neighbor-

Worksheet No. 1-

Under each question, check the answer that says what you feel or
comes closest to it. Be honest with yourself- you're the one who
benefits from your brutally candid honesty:

  ➢   Are you a self-starter?

      * I do things on my own; nobody has to tell me to get going.

      * If someone gets me started, I keep going all right.

      * Easy does it. I don't put myself out until I have to.

➢   How do you feel about other people?

    * I like people. I can get along with just about anybody.
    * I have plenty of friends--don't need anyone else.

    * Most people irritate me.

➢   Can you lead others?

    * I can get most people to go along when I start something.

    * I can give the orders if someone tells me what we should do.

    * I let someone else get things moving. Then I go along if I
    feel like it.

➢   Can you take responsibility?

    * I like to take charge of things and see them through.

    * I'll take over if I have to, but I'd rather let someone else

    * There's always some eager beaver around wanting to show how
    smart he is. I say let him.

➢   How good an organizer are you?

    * I like to have a plan before I start. I'm usually the one to
    get things lined up when the group wants to do something.

    * I get all set and then something comes along and presents too
    many problems. So I just take things as they come.

    * I do all right unless things get too confused. Then I quit.

➢   How good a worker are you?

    * I can keep going as long as I need to. I don't mind making
    sacrifices and working hard for something I want.

    * I'll work hard for a while, but when I've had enough, that's

      * I can't see that hard work gets you anywhere.

  ➢   Can you make decisions?

      * I can make up my mind in a hurry if I have to. It usually
      turns out O.K., too.

      * I can if I have plenty of time. If I have to make up my mind
      fast, I think later I should have decided the other way.

      * I don't like to be the one who has to decide things.

  ➢   Can people trust what you say?

      * You bet they can. I don't say things I don't mean.

      * I try to be on the level most of the time, but sometimes I
      just say what's easiest.

      * Why bother if the other person doesn't know the difference?

  ➢   Can you stick with it?

      * If I make up my mind to do something, I don't let anything
      stop me.

      * I usually finish what I start--if it goes well.

      * If it doesn't go right away, I quit. Why beat your brains out?

  ➢   How good is your health?

      * I never run down!

      * I have enough energy for most things I want to do.

      * I run out of energy sooner than most of my friends seem to.

Count the Checks You Made-

How many checks are there beside the first answer to each question?

How many checks are there beside the second answer to each question?

How many checks are there beside the third answer to each question?

If most of your checks are beside the first answers, you probably
have what it takes to run a business. If not, you're likely to
have more trouble than you can handle by yourself.

Better find a partner who is strong on the points you're weak on.

If many checks are beside the third answer, not even a good partner
will be able to shore you up.

Getting Started-

  ➢   Your building:

      * Have you found a good building for your store?

      * Will you have enough room when your business gets bigger?

      * Can you fix the building the way you want it without spending
      too much money?

      * Can people get to it easily from parking spaces, bus stops, or
      their homes? * Have you had a lawyer check the lease and zoning?

  ➢   Equipment and supplies:

      * Do you know just what equipment and supplies you need and how
      much they will cost?

      * Can you save some money by buying second hand equipment?

  ➢   Your merchandise:

      * Have you decided what things you will sell?

      * Do you know how much or how many of each you will buy to open
      store with?

      * Have you found suppliers who will sell you what you need at a
      good price? * Have you compared the prices and credit terms of
      different suppliers?

  ➢   Your records:

    * Have you planned a system of records that will keep track of
    your income and expenses, what you owe other people, and what
    other people owe you?

    * Have you worked out a way to keep track of your inventory so
    that you will always have enough on hand for your customers but
    not more than you can sell?

    * Have you figured out how to keep your payroll records and take
    care of tax reports and payments?

    * Do you know what financial statements you should prepare? * Do
    you know an accountant who will help you with your records and
    financial statements?
➢   Your store and the law:

    * Do you know what licenses and permits you need?

    * Do you know what business laws you have to obey?

    * Do you know a lawyer you can go to for advice and for help
    with legal papers?

➢   Protecting your store:

    * Have you made plans for protecting your store against thefts
    of all kinds--shoplifting, robbery, burglary, employee stealing?

    * Have you talked with an insurance agent about what kinds of
    insurance you need?

➢   Buying a business someone else has started:

    * Have you made a list of what you like and don't like about
    buying a business someone else has started?

    * Are you sure you know the real reason why the owner wants to
    sell this business?

    * Have you compared the cost of buying the business with the
    cost of starting a new business?

    * Is the stock up to date and in good condition?

    * Is the building in good condition?

    * Will the owner of the building transfer the lease to you?

      * Have you talked with other business owners in the area to see
      they think of the business?

      * Have you talked with the company's suppliers?

      * Have you talked with a lawyer about it?

Making It GO-

  ➢ Advertising:

      * Have you decided how you will advertise? (Newspapers--

      * Do you know where to get help with your ads?

      * Have you watched what other stores do to get people to buy?

  ➢   The prices you charge:

      * Do you know how to figure what you should charge for each item
      you sell?

      * Do you know what other stores like yours charge?

  ➢   Buying:

      * Do you have a plan for finding out what your customers want?

      * Will your plan for keeping track of your inventory tell you
      when it is time to order more and how much to order?

      * Do you plan to buy most of your stock from a few suppliers
      than a little from many, so that those you buy from will want to
      help you succeed?

  ➢   Selling:

      * Have you decided whether you will have sales clerks or self-

      * Do you know how to get customers to buy?

      * Have you thought about why you like to buy from some sales
      clerks while others turn you off?

  ➢   Your employees:

      * If you need to hire someone to help you, do you know where to

      * Do you know what kind of person you need?

      * Do you have a plan for training your employees?

  ➢   Credit for your customers:

      * Have you decided whether or not to let your customers buy on

      * Do you know the good and bad points about joining a credit-
      card plan?
      * Can you tell a deadbeat from a good credit customer?

A Few Extra Questions-

      * Have you figured out whether or not you could make more money
      working for someone else?

      * Does your family go along with your plan to start a business
      of your own?

      * Do you know where to find out about new ideas and new

      * Do you have a work plan for yourself and your employees?

      * Have you gone to the nearest Small Business Administration
      office for help with your plans?

If you have answered all these questions carefully, you've done some
hard work and serious thinking. That's good.

But you have probably discovered some things you still need to know
more about or do something about. Do all you can for yourself, but
don't hesitate to ask for help from people who can tell you what you
need to know.

Remember, running a business takes guts...

Go Forth Boldly and Without Fear!


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