Tag Archives: article

5 Pillars of Small Business Success

It has been a while since I’ve found an article interesting enough to use it as a “guest article” but I get asked very, very often what the keys to a successful business are and this article nailed it!

It was featured on the SBA’s website in January of this year and I’ve been going to share it for a while.  I hope it is interesting and helpful to you!

5 Pillars of Small Businesses Success

By Marco Carbajo, Guest Blogger
Published: January 13, 2015

 

What does it take for a small business to achieve success?Whether you’re already in business, or preparing to start a business, it takes hard work, tenacity and drive to achieve a high level of success. Lori Greiner, star shark of ABC’s Shark Tank says, “Entrepreneurs are willing to work 80 hours a week to avoid working 40 hours a week.”

According to Elizabeth Wilson of Entrepreneur Magazine, while some 40 million businesses are started each year, a paltry 350,000 break out of the pack and begin growing and making money. So how can a small business owner overcome some of the common business pitfalls? Marcus Lemonis, CEO of Camping World and star of CNBC’s prime time reality series The Profit, knows all about determining the success or failure of a business. Lemonis says, “Business success is about the three P’s: People, Process and Product.” Here are five pillars that make a small business successful.

1) People

If you want your small business to succeed, you need a fantastic team. Russell Simmons, Entrepreneur and founder or Def Jam Recordings says, “Surround yourself with people that are smarter than you.” A company can accomplish amazing things when it has leadership and a team who is inspired, hardworking and believes in the company’s mission.

2) Plan

“Quality is the best business plan, period,” says John Lasseter, chief creative officer for Pixar and Disney. Just about everyone in the business world agrees that having a plan is important. And that doesn’t mean the big formal business plan document you fear like a term paper. It starts small and may grow in time. At a start-up, implementation is everything. That means it’s essential to establish responsibilities, set goals, and track performance. You will also need to answer key questions, such as:

  • Have you identified your target customers?
  • What problems are you trying to solve for them?
  • What will be the most effective marketing and promotional strategies?

3) Process

Dr. W. Edwards Deming said, “85 percent of the reasons for failure to meet customer expectations are related to deficiencies in systems and processes…rather than the employee.” It’s crucial that you have a full and clear understanding of your company’s processes and have the right systems in place.

4) Product

Does your product solve a problem? Does it exist yet? Is there something that is out there that your product does in a different way? Is there a demand for your product? Success in business requires doing something you’re passionate about that fills a need in the marketplace. Debbi Fields, Founder of Mrs. Fields Bakeries says, “Once you find something you love to do, be the best at doing it.”

5) Profit

When it comes to measuring a successful business, profitability is probably the first thing that comes to mind. Is the company making money? A critical component of running a successful business is knowing your numbers. “If you want to be successful in business, you need to become proficient at handling certain numbers. You need to be able to read and understand your financial dashboard” says Dawn Fotopulos, Associate Professor of Business at The King’s College in New York.

Starting and running a successful business can be a fulfilling and rewarding experience. You as a small business owner should never stop learning, innovating, planning and growing. “Leaders spend five percent of their time on the problem and 95 percent of their time on the solution. Get over it & crush it!” says Tony Robbins.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’, ‘Alltop’, and ‘Entrepreneur Connect’.

SBA Loan Fee Reductions Help Small Business Owners Nationwide

Happy Tuesday!

In this week’s SBA e-news I found this article.  I’m all about saving money and helping businesses be successful, so I hope you will both find this of interest as well as helpful.

In order for small businesses to remain viable in a recovering economy, access to capital must remain an SBA priority.  At the same time, applying for and getting a commercial loan involves certain costs that may make borrowers think twice before making that commitment.

Often times, small businesses that need loans with smaller dollar amounts –$350,000 and under- are usually either just starting or in their early stages. Attention to the bottom line is paramount at this critical time, and a lack of adequate financial resources may become an obstacle to growth.

Mindful of this situation and consistent with our mission to help small businesses start, grow and succeed, SBA recently introduced two initiatives aimed at eliminating certain borrower fees, thus making it cheaper and easier for small businesses to obtain much needed financing.

One of the initiatives, launched at the end of fiscal year 2013, set borrower fees to zero (0) on all 7(a) loans $150,000 and under originated on or after Oct. 1, 2013. This initiative is among SBA’s latest efforts to make sure we’re reaching more business owners and entrepreneurs to help them to tackle the next challenge in their businesses.

The 7(a) Loan Program is the SBA’s primary program to help start-up and existing small businesses obtain financing when they may not be eligible for conventional business loans .  In just three months after its implementation, fee elimination on loans $150,000 and under have saved small businesses nationwide more than $5 million. A small business obtaining a $150,000 loan now saves more than $2,500 in fees, which can be used for other business expenses.

The SBA has begun a similar effort to help small business owners who are veterans. Beginning Jan. 1, 2014, SBA launched the SBA Veterans Advantage initiative, which has zero borrower fees on all loans $350,000 and under made through this program.  This program is expected to yield significant savings for veterans looking to start or grow a business.  Of all SBA loans made to veterans during the last 5 years, 73 percent were below $350,000.

In the first 10 days (Jan 1 – Jan 10) this initiative saved veterans business owners almost $179,000.

While it is still too early to gauge the impact these initiatives will have on the success of small businesses, the initial numbers seem to indicate that savings will be significant.

These two initiatives are in place through the end of the current fiscal year, Sept. 30, 2014.

For more information about SBA loan programs and services or to find an SBA lender, visit www.sba.gov, or the SBA District Office nearest you.

Business owners, managers & thinking-about-its!

Do you want to capitalize on and learn from the mistakes of others?

Experts say you should:

What the experts say

  • Discuss with a CPA the expected monthly expenses before starting a business.
  • Establish a five-year business plan and update it frequently and regularly.
  • Create a cash reserve equal to at least six to nine months of operating expenses.
  • Research several website developers before building a website. Be realistic on the time and money it will take.
  • Check monthly reports of overdue bills.
  • Know your business cycle, and plan bigger bills to come due in months with healthy cash flows.
  • Take a couple of hours each week to learn details on one customer and their business.
  • Focus time on running the business rather than working in it.
  • Understand the different types of business entities and how that will affect taxation and possible liabilities.
  • Delegate.
  • Learn the features of your financial software that could save time and money and help with planning.

From an article in The Record by Carol Lawrence

Small Business Advocate: Selling online is an imperative to be successful

By Jim Blasingame, Special to The Commercial Appeal

Continuing the series on small-business responses to poll questions on our e-newsletter and website, recently we asked this question about e-commerce: How much of your annual revenue comes from online sales? Compare your answer to what our respondents said:

— Five percent said all revenue came from e-commerce.

— Fourteen percent said more than half of their sales came from the Internet.

— A little more than half said e-commerce represented less than 50 percent of total sales.

— One-quarter said they had no online sales at all.

E-commerce has been around for a big chunk of the commercial Internet age, which began in 1995 when unencumbered access to the Internet was fully allowed.

In terms of historical marketplace practices, however, e-commerce is just a baby. So I’m actually quite pleased with the mix of responses we received, indicating that 75 percent of small businesses are generating some e-commerce revenue.

But over the next five years, there will be significant increased pressure to generate online sales.

According to the research firm, Forrester, online sales will reach $248.7 billion in the next five years, accounting for 8 percent of total U.S. retail sales by 2014. But the next statistic may be more important (read: ominous) for small businesses.

Forrester also predicts that by 2014, over half of all retail sales will be influenced by online product and company research before customers make a purchase. The reason this stat is so significant is because of another piece of research that produced this astonishing number: Half of small businesses do not have a website.

Regardless of size or industry, no business can expect to be successful in the future without a web presence. Even if you don’t sell online, you must be available online so prospects can find you the way people are looking today. Here are two words that make having a website even more of an imperative: local search.

Local search is increasingly replacing the phone book or dialing 411. Even when customers don’t expect a business to have e-commerce capability, like a restaurant or dry cleaners, they do expect to be able to find you online, with product offerings, directions and a clickable phone number.

If you don’t have a website, get one; today you can actually get a simple one for free. And unless you sell nuclear products or Stinger missiles, please, find a way to offer e-commerce to your customers; It’s not free, but it’s no longer cost-prohibitive.

Write this on a rock …

Serving customers online is not an option, it’s an imperative

SEO 101: Inbound Links

A guest article from DPACC Member, Chris Schmitz at Perception LLC, from their blog on tips to improve YOUR website.   This has great information and I’m working on putting it into practice myself.  In that vein, wanna link?  Comment and we’ll connect – helps us both!  But, on to the advice from Chris:

There is one major element of SEO that is somewhat out of your control as a website owner.  Unfortunately, it happens to be one of the most important elements and is capable of massively increasing the amount of traffic to your site in a matter of days, sometimes even minutes.  In case you hadn’t guessed by the title, this element is inbound links.  In other words, links from other sites to yours.

Why are inbound links important?

Inbound links are great for SEO for 2 main reasons:

  1. They bring traffic to your site whenever someone clicks the link
  2. Search engines pay attention to inbound links to determine how important a page is and where it is placed in their search results

Aside from search engine results, links from other sites are the only way that people will be able to find your site.  To put it in business terms, inbound links are essentially referrals to your site from other sites.  The more referrals you have, the more business, or at least inquiries, you will get.  If someone is referred to you through a friend to buy your products or services, but upon further investigation they find that your office is in the basement closet with a leaky ceiling, they will most likely take their business elsewhere.  The same goes for websites.  If someone is referred to your site (through an inbound link) but is immediately turned off by the design of your site or content that doesn’t apply to them, they will leave immediately, and most likely never return.  On the other hand, if you have a design that is, at the minimum, easy on the eyes, and content that is applicable to them, you can be fairly confident that they will return again at some point in the future.

Inbound links and PageRank

When search engines are deciding which pages would be relevant to a user’s search, they take into account not only the content on the page, but also how many other sites around the web link to that page.  The more sites that link to a page, the more popular it is perceived by search engines. Google, the largest of all search engines, refers to this perceived importance as PageRank.

PageRank is essentially a popularity contest.  If you have a lot of readers and friends around the web, it becomes easier to find people to link to your site, thus getting you more traffic and potential people to link to your site.  Each link to your site is a vote saying that you think this page or site is important, and the importance of each vote is determined by a site’s PageRank.  As you can see, search engine optimization has the potential to grow exponentially over time, you just need to make an honest effort to get started and continue improving even after you have some success.

For more information on PageRank, check out Google’s Technology Overview page.

Obtaining inbound links

Many people think that once they have a well-designed and coded site, it is up to the rest of the site owners on the web to make their site popular by linking to them.  After all, you can’t force anyone to put up a link to your site.  However, there are some ways things you can do that will almost always result in increased traffic to your site.

Submit your site to directories

In almost every industry, there are directories of sites that simply list product or service providers specific to that area or industry.  Sometimes you will be listed in them automatically, and other times you will need to sign up manually.  Chambers of Commerce almost always have a member directory with links to each business’s site.  If your site is well-designed, consider submitting it to web design galleries.  Look for any opportunity possible to submit your site and you can be certain to get at least a few links and some additional traffic to your site.

Get linked to by your peers

Have some family/friends/other businesses with their own sites that would be willing to promote you?  Ask them to post a link or write an article about you to help improve your SEO.  It may not be worth paying much for this service, but there is always something that can be done to return the favor.

If there are blogs focusing on your area or industry, try emailing some of the writers to see if they would be interested in doing an article or interview on you or your business. Authors love getting feedback on their content.  Quality feedback and questions in an article’s comments are guaranteed to get the author’s attention.

Write guest articles in online or print publications

Blogs and online magazines are popping up all over the web, and many of them will allow you to write guest posts for them.  Almost all of these sites will provide a link back to your site as well as a picture and short biography about you (just as you see at the bottom of this article).  Some sites will even offer compensation in addition to the link and bio.  Take a look around at some blogs/online magazines on topics relevant to your industry and see if there is a way to contribute.

Get creative

This list is by no means exhaustive of all the ways you could potentially obtain inbound links.  Take some time to make a plan to market your website and obtain some links. Whatever method you choose, just remember that there is no way to obtain these links without putting in some effort.

Caution: Any site that promises inbound links and improved PageRank for free, or a fee, is most likely going to end up hurting you in the long run and could potentially get your site blacklisted.

Building inbound links takes time, and obtaining quality links is even harder. Be persistent and make sure that your site has quality content and is well-coded before trying to market your site.

By: Chris Schmitz

A web designer/developer from De Pere, WI. Co-owner of Perception, a web and print design company specializing in creative marketing for small to medium-sized businesses. Follow him on Twitter at @ccschmitz

De Pere Chamber makes newspaper in Holland!

Translated from the local newspaper in Twello Holland

On March 16 j.l. in De Pere, Wisconsin, about 350 km north Chicago in the USA, the opening of a new place Ruitenberg establishment. The official opening was done by the Mayor of De Pere, Mayor Mike Walsh with Ms Cheryl Detrick, President the Chamber of Commerce, and Ad de Haas, Director of Ruitenberg Ingredients B.V.

During the reception, several items served, prepared with ingredients by Ruitenberg delivered, so the attendees a glimpse had the opportunities. The new facility is also a technological present, where product demonstrations can be given. Currently focusing Ruitenberg USA mainly on the meat industry by supplying ingredients for the production of sausages. The location offers the possibility for
extension products to the baking industry delivered. With the presence of the new facility in Wisconsin expects its Ruitenberg Sales in the U.S. to grow strongly over the coming years.

Ruitenberg Ingredients is a family owned company founded in 1938 and located at modern facilities in Twello, the Netherlands. Product developers, technologists and analysts work on new products and applications in a state-of-the-art technology center with a strong focus on supplying a versatile product range for specific applications in the meat, convenience, bakery and confectionery industry. The site is De Pere is the first US location for the company.

In case you are curious, the original language is below: Op 16 maart j.l. heeft in De Pere, Wisconsin, ca. 350 km ten noorden
van Chicago in de USA, de feestelijke opening plaats gevonden van een nieuwe
Ruitenberg vestiging. De officiële opening geschiedde door de burgemeester van
De Pere, Mayor Mike Walsh samen met mevrouw Cheryl Detrick, de voorzitter
van de kamer van Koophandel, en Ad de Haas, directeur van Ruitenberg Ingredients
B.V.
Tijdens de receptie werden diverse producten geserveerd, bereid met ingrediënten
die door Ruitenberg geleverd worden, zodat de aanwezigen een voorproefje
kregen van de mogelijkheden. In de nieuwe vestiging is ook een technologiehal
aanwezig, waar productdemonstraties gegeven kunnen worden. Momenteel richt
Ruitenberg USA zich vooral op de vleesindustrie met de levering van ingrediënten
voor de productie van worsten. De locatie biedt echter de mogelijkheid voor
uitbreiding met producten die aan de bakkerij-industrie geleverd worden. Met de
aanwezigheid van de nieuwe vestiging in Wisconsin verwacht Ruitenberg haar
verkoop in de USA sterk te kunnen laten groeien de komende jaren.

What States and Cities Are Doing to Help Small Businesses

From our friend JD Milburn at Wisconsin Main Street sent this interesting article:

While Washington debates how to help the country’s struggling small businesses, states and municipalities have stepped up with an array of initiatives to stanch closings and save jobs.

The local approaches are as varied as subsidizing wages for new hires, running a $100,000 regional business-plan competition and giving out grants to help small manufacturers reposition themselves. Some states and cities are using federal stimulus dollars, and others are mixing federal, state and private dollars.

Here are some examples:

A 100 Percent Hiring Subsidy

San Francisco is using federal stimulus funds to give immediate aid to small-business owners. Its $25 million program reimburses owners for 100 percent of the wages for certain new hires. So far, restaurants, cafes, delivery services and even law firms have hired nearly 1,800 people through the program, called Jobs Now.

Employers do have to pay for Social Security and unemployment insurance, and the program requires those hired to have been unemployed for 30 days or longer. More than 800 businesses have signed up for the program, and the city is pushing to extend it beyond its September expiration.

At first, said Steven B. Falk, chief executive of the San Francisco Chamber of Commerce, “businesses had to warm up to the idea of turning to the government for hiring. Now, small businesses are telling me this is the motivation that pushed them to hire.”

Encouraging Customer Loyalty

A Cleveland-area small-business council is trying to shore up its 17,000 member businesses with a program that encourages consumers to patronize locally owned enterprises instead of big-box chains or Internet sites.

Last year, the Council of Smaller Enterprises began a Web site called “I Buy NEO” — that’s Northeast Ohio — where consumers can search for discounts and bargains at participating local businesses. So far, about 300 businesses as diverse as art galleries and home-improvement stores have signed up to offer rebates or discounts. About 11,000 cards, which cost $10, have been sold. “When a resident buys locally,” said Dan Roman, the council’s director, “independent studies have found 68 cents of each dollar stays in the community.” The current average for the region is 43 cents.

There is no charge for small businesses to join, and about two dozen companies have been signing up each month. Even though the program’s $150,000 budget for marketing, Web development, printing and postage is modest, Mr. Roman says, sales activity tied to the loyalty cards has increased 40 percent over the last six months.

Training for Laid-Off Workers

Last June, the Michigan Small Business and Technology Center began to train laid-off workers to start new ventures.

So far, 527 people have taken the course, which the center offers in partnership with the Ewing Marion Kauffman Foundation. To date, 160 people in the Michigan program have introduced new business ventures, and more than 125 owners of existing businesses have enrolled in separate courses to bolster their chances of surviving. Another 1,000 would-be entrepreneurs are expected to complete the program this year.

The unemployed workers, many laid off from the auto industry, come to the program with an idea for a small business and must search for capital on their own. The program, said a spokeswoman, Jennifer Deamud, “preps the company for a loan and makes connections for the owner.”

Of course, the training is no guarantee of success. Only about half of the enterprises are likely to survive beyond three years, according to the Kauffman Foundation, which has been offering training since March 2009, in New York City, Philadelphia, Kansas, Missouri, Colorado and Minnesota.

When Tracy Pospeshil, 37, of Fenton, Mich., lost his job at an automotive supply company, he enrolled in Michigan’s program and started a new business last spring selling engine-warming heaters for trucks and buses. He says he’s on track to make a mid-five-figure income by this summer.

Helping Small Manufacturers Retool

Connecticut is using state money to set up a matching grants pilot program to help its small manufacturers — many of them in the aerospace industry — aim at the growing medical products market. The state budgeted $250,000 and is accepting applications for grants of $5,000 to $25,000, said Deborah Santy, director of the Connecticut Small Business Innovation and Research Office.

Firms applying must provide at least three years of financial information, be located in Connecticut and be registered as a manufacturing company and keep their manufacturing in the state. Ms. Santy said she had received more than 60 applications for the program so far. Kristen Muschett, chief executive of aerospace test-equipment maker Habco, said the $35,000 matching grant was helping her explore the feasibility of manufacturing and marketing a new machine that helps stroke victims and other neurologically impaired patients learn to walk again.

Providing On-Site Financial Expertise

Last year, North Carolina began a $600,000 pilot program called BizBoost to help the Charlotte area rebound from the big-bank layoffs. The program has provided financial guidance to 158 small businesses, typically with 10 or fewer employees, since last fall.

In January, Gov. Beverly Perdue announced the program would be expanded to the entire state, with $2.4 million in state and federal funds that will be used to add additional experts, including accountants and managers with small-business experience. The goal is to help small businesses with the nitty-gritty of managing cash flow and lining up financing. “We are helping businesses manage their customer base, restructure their debt and position themselves to grow,” said George McAllister, regional director of the North Carolina Small Business and Technology Development Center.

Still, Mr. McAllister conceded, it is hard to measure the program’s success. One client, John Meeks, owner of AppleBlossom Insulators, said his insulation business got help from a BizBoost expert who did a financial analysis of his books, developed cash-flow projections, helped him ready his finances to seek an angel investor and helped him produce a 5 percent increase in revenue in a tough year.

Loans and a Business-Plan Competition

In Missouri, Charlie A. Dooley, chief executive of St. Louis County, had heard complaints from owners who could not get bank loans, so he decided to spearhead a new small-business loan program called Boost. The program is administered by the St. Louis County Economic Council and uses county funds and a $5 million line of credit from PNC Bank, a Pittsburgh-based financial institution that had recently bought a St. Louis bank.

The program is aimed at owners who want to purchase land, machinery, equipment or buildings but do not have adequate income or net worth to qualify for conventional bank loans. The maximum loan is $500,000, and in the few weeks since Boost was announced, Mr. Dooley said, more than 100 owners have applied.

The county also started a business-plan competition featuring $100,000 in cash prizes and in-kind professional services. The competition, with money provided by the St. Louis-based financial services firm, Edward Jones, will announce its winners in June. So far, it has received applications from more than two dozen hopefuls, including would-be microbrewers and laid-off scientists.

Helping Businesses Expand

Last year, Florida introduced a state-financed program to help businesses keep their employees by expanding their customer base. The GrowFL program helps established companies identify new markets, research industry developments and maximize their use of social media. The program has a team of business analysts whose assistance is free to companies with at least $1 million in annual sales and 10 or more employees.

So far, the program, operated by the Florida Economic Gardening Institute, has enrolled 13 companies, including a Jacksonville industrial pump manufacturer that is trying to locate new customers after sales declines forced it to lay off workers. Another 72 established companies are in the pipeline for help. Gov. Charlie Crist has asked the legislature to add $3 million to the program’s $1.5 million budget.

Other areas, including Portland, Ore., have started similar programs.

Landlord-Retailer Cooperation Called Key to Industry’s Future

From the ICSC, but is definitely not just for shopping centers.  All landlords and retailers can learn from this:

ICSC Suggests Cooperative Strategies Needed to Secure Survival and Foster Future Success for
Shopping Center Landlords and their Tenants

During the current difficult economic time, retail landlords and retailers need to adopt a mutual vision and work as partners to “reinvigorate consumerism, reposition business cooperation and restore investor confidence,” said the International Council of Shopping Centers (ICSC) in a February 27th Retail Real Estate Business Conditions Report.

“Retail property owners are experiencing higher vacancy rates, which are likely to rise further before the business cycle impacts run their course,” said ICSC, adding, “Now, more than ever, retailers and retail property owners must work closer.” The organization went on to offer specific short-term and long-term strategies that could be adopted to “build a stronger future” for retailers and retail property owners.

SHORT-TERM STRATEGIES
CO-TENANCY REQUIREMENTS

In a recent CoStar Advisor article titled, “Retailers Pressure Landlords Publicly for Rent Cuts,” a number of retail and shopping center executives said that several retailers are exercising co-tenancy clauses to either terminate or lower rent paid on store leases. With anchor and junior anchor tenants continuing to close stores, these practices are likely to heighten.

In its fourth quarter earnings call, Daniel Hurwitz, president and COO of Developers Diversified Realty (NYSE: DDR), talked about co-tenancy provisions. “Shopping center co-tenancy is typically tied to either a large anchor store, such as Wal-Mart or Target or a series of junior anchors. For example, a co-tenancy clause may indicate that two of the following four anchors must be open and operating otherwise the tenant is permitted to go into co-tenancy, or alternative rent. If co-tenancy is not cured, typically within the first year, the tenant has the right to terminate the lease and close their store, or revert back to minimum rent. In most cases, the tenant will chose [the latter], as the cost of closing a store and opening in a new location is much greater than staying in the current location.”
Dick’s chairman and CEO, Ed Stack, said that co-tenancy is part of the reason it hasn’t opened as manystores. “One of the headwinds is that developers are bringing less product onto the market. When we open a store we have usually some pretty strict co-tenancy requirements and with other people scaling back, it is difficult for the developer to meet those co-tenancy requirements,” he said.
ICSC says that retailers should place less importance on co-tenancy requirements. “Too often, retailers ’leases demand certain tenants be present in the same property for their business model to succeed, but that logic fails to focus on the true reason behind that contractual demand, which is to generate complementary traffic. Riding on the coat tails of other similar-type retailers seems increasingly risky.”

Hurwitz said that 1 in 30 of its tenants had requested rent relief. Pointing to landlords’ frustration with retailers pushing for such relief, Hurwitz said, “Overall, most of the requests are being received by tenants with healthy balance sheets that are attempting to exploit the current environment.”
Instead, recommends ICSC, at least in the short term, retailers should support landlords’ efforts to
maximize occupancy at shopping centers, without so much focus on specific retailers being part of the tenant mix, because from a basic perspective, a mass of retailers, rather than a certain few, collectively generates more traffic.

REPORTING AND TRANSPARENCY

In order to grant retailers temporary rent relief or other concessions during this tough sales environment, most retail real estate executives told CoStar that landlords require a high level of “transparency” from the retailers. Landlords won’t grant such relief unless a retailer shows proof that down sales are a result of the recession, and not just a consistent pattern of declining sales.
Unfortunately, in general today, “Retailers have shifted ever more towards providing less sales
performance information with less frequency of that information,” said ICSC. The organization said that retailers should be more forthcoming with landlords regarding store performance metrics. If transparency increases, the industry could create new benchmarks, which would be useful to all parties involved.

UNCOMMON STRATEGIES

In a couple unorthodox suggestions, ICSC said retail auctions and pooling of back-end operations should be considered as short-term strategies.

Landlords could allow retailers — not just those closing a store — to conduct “auctions” of inventory,
where retailers would allow shoppers to bid on a certain pool of merchandise, in a silent format, for a
controlled time period, said ICSC. This would allow retailers to “clear merchandise faster [and would] incentivize the bargain hunter and generate spillover shopping” at the center, said ICSC.
To lure local tenants to lease space at shopping centers, ICSC suggested that landlords should offer a
package of tenant services. For instance, a landlord could provide tenants with accounting, ordering, marketing, or some other services that would reduce overhead costs, thereby helping tenants focus on maximizing sales.

LONG-TERM STRATEGIES

PARTNER ON NEW CONCEPTS

Landlords should more often act as an incubator for new and interesting retail concepts, recommends ICSC. For example, if a concept is identified that has the potential to drive traffic to a center (because of its uniqueness), a landlord should consider taking an equity position in, and granting reduced rent to, the retailer.

Such a strategy would help keep the landlord’s shopping centers “fresh”, said ICSC — a quality that is
extremely important in the retail real estate industry, as it is subject to the ever-changing spending
patterns of consumers. ICSC didn’t recommend that landlords maintain an ongoing investment in the
retail concept, however, as the idea is to keep investing in different concepts to keep centers new and interesting.

Eric Rubin, principal of Madison Retail Group addressed the role landlords can play in new retail concept incubation in a recent story posted on Madison Marquette’s Places Magazine website, titled, “How to Lease in Today’s Market”.

“A landlord must consider these tenants an investment in the entire center’s success and not simply a stand-alone deal to increase net operating income,” said Rubin. Smaller-scale landlord “investments” commonly include giving healthy tenant improvement allowances and offering entrepreneurs access to the landlord’s own in-house experts, for little to no cost, in areas of design, financing, marketing, and more.

“It may be difficult to accept investing so much in a tenant that may not succeed, but these costs are also a potential investment in the next concept. A restaurant build-out today for a concept that only survives two years will still be a good investment when the next concept, with a more proven track record, agrees to a favorable deal because of the pre-existing infrastructure,” said Rubin.

Regarding the heightened financial incubation relationship ICSC suggests, Rubin said, “Many developers have successfully taken financial stakes in the prospective retailers and earned substantial returns for their centers and for themselves.”

THINK OUTSIDE THE BOX ON TENANT MIX

In “Filling Vacant Retail Boxes Requires Thinking Outside the Box,” CoStar Tenant research revealed that service tenants, at least on a local basis, continue to sign new leases at U.S. shopping centers. Some of those uses include tax preparation, insurance, real estate, financial, hair salons, nail salons, spas/ massage/ acupuncture, doctors and veterinarians, tutoring, copying/shipping, government offices, and more. In addition, agents are increasingly seeking nontraditional tenants to fill the increasing pool of vacant spaces at their centers.

While general thinking is that the need to lease to these tenants is a short-term issue, ICSC suggested
that the retail real estate industry has reached a point where a paradigm shift in the tenant mix is
required.

Particularly, landlords should encourage service concepts that complement anchor stores, said ICSC. For example, a stand-alone tailor service might make sense as a complement to a department store or lifestyle center with a concentration of apparel retailers.

INTRA-INDUSTRY FINANCING

ICSC said it would like to see an intra-industry, collective, state-charted, loan company developed. This entity would have “broad banking powers, operate with federal deposit insurance”, and make loans “based on covered bonds.”

On Jul. 28, 2008, the “U.S. Treasury Department and bank regulators unveiled guidelines for the
development of a covered bond market in the United States as an alternative source of funding,” said
Reuters. Covered bonds have been very popular in the European market for a long time now.
What is a covered bond? “Securities issued by banks and backed by mortgages or public-sector loans.

Blogging on blogging!

I’m taking a break from my chores (yes, the ones I didn’t get done yesterday) and clicking through my group updates on LinkedIn.  I’ve fallen behind a good bit there, I’m embarrassed to admit and am trying to get back in the saddle.

While reading, I found a blog post recommended in the New North Social Media Breakfast group talking about the importance of blogging.

A few things caught my eye that I thought you might find interesting too:

According to the source, the five reasons why companies should blog are:

  • Communication with customers and the public
  • Demonstration of corporate responsibility
  • Reputation management
  • Promotion of products and services
  • Provide executives and/or employees the chance to communicate openly

Those are the reasons I blog.  For any one reading who knows me, you know I love to communicate with people and there is just never enough time.  This blog is a way to do that with limited expenditure of time.

The article is full of great info and links to some awesome blogs and other links to articles.  If you are taking a break, or looking to check off “learn something new today” on your daily goal sheet – this will do it!!

Some good news for manufacturing

We’ve heard lots of bad news about manufacturing, how about some good?
According to several recent surveys, the U.S. manufacturing sector may be showing signs of a rebound.

The Institute for Supply Management (ISM) purchasing managers index checked in at 55.9 in December which was its highest mark since April 2006. Additionally, the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook came in at 57 compared to 38 in September 2009. Wharton finance professor Nicholas Souleles noted that the ISM data usually is a good indicator of improving times in the manufacturing sector. As manufacturing rebounds, expansion usually follows which translates into new jobs being created as employers are more confident about the economy.

Marshall Fisher, a professor of operations and information management at Wharton, cautions that the recovery is still far off because increases in manufacturing output are being measured against a low starting point. Fisher summed up the situation succinctly, “While orders may be expanding at the fastest pace in more than three years, that is just the rate of change. When you have things fall that far, you can uptick quite a bit but still be way behind where you have been.”

There are signs that manufacturing is improving outside of the United States as well. Data from Markit Economics shows that the manufacturing rate in December in Europe grew at its fastest rate in 21 months.

While manufacturing is important, Souleles stresses that services are also an important part of the U.S. economy. “We have lost a lot of jobs in manufacturing; over the long run, that’s a concern, but we don’t want to go too far the other way and say the increasing role of services is not of value….There’s nothing wrong with a country focusing on the areas in which it has a comparative advantage,” said Souleles.

Source:
“Flexing Its Muscle: Why Manufacturing is Bouncing Back.” Knowledge@Wharton. January 20, 2010