Wanting to STAY in business?

A recap!  Tuesday was trends in business; Wednesday was customer service tips; yesterday tax implications of opening a small business, and today is an important topic to help you stay in business.  After all, isn’t that the point?

In my current life, I run a non-profit.  A note on non-profits.  “Non-profit” is a tax status, not a business model; or as a mentor of mine used to say, “with no margin, there is no mission.”  In other words, even non-profits have to have some!  But, most of you reading this are in business to actually MAKE a profit.  Doing so isn’t easy – not in any time frame; but you have to plan to make a profit.  The adage of “most businesses don’t plan to fail, they fail to plan.”  Today’s entry is about one aspect of planning, knowing your break-even point, brought to you by our friends at Fluidity Business Planning Group.

Business Environment

One of the most common remarks we hear is that business owners seem to be waiting for the economy to return to 2008 levels, the way things used to be. We hate to burst the bubble, but that is not going to happen! Our economy has changed, and those businesses that are going to survive now understand they need to adapt to the new economy or close their doors.

Many business owners found ways to reduce costs and overhead to retain employees. They wanted to demonstrate they were more concerned about their people than profits, and that was a smart move as they hoped to hold on until the economy improved and down-sizing could be stopped or reversed. Now the realization is settling in that an economic turn-around may be a long time coming. Other action needs to be considered, such as expanding product lines or adding services to meet changing demands.

Tough choices are being made every day, and if the business has trimmed to the bare bones already, it is now a matter of what moves are the wisest to make. Banks need to see business plans and roughly 20% collateral before they issue or extend loans. Gas prices and consumer prices are increasing, raising concerns about inflation. Tax scenarios are changing and incentives are becoming more stringent. Yet some businesses succeed while others fail.

Cash is ruling the economy through the first quarter of 2011. Cash flow is the major concern for accountants, bankers, and business owners. Expect more aggressive pursuit of delinquent accounts than we are already seeing in the consumer marketplace. Companies can ill afford to carry accounts past 60 days. They are getting pressure from creditors to stay current on the other side of the equation. Cash is King!

One of the best ways we have found for business owners to understand their position is to get a firm grip on their break even status. It is part of the planning process and involves knowing what your expenses are (rent, utilities, insurance, labor, inventory, interest payments, etc.) so you have an accurate picture of what goes out on a monthly basis. If you operate five days a week, you divide those costs by 20 work days a month to come up with your daily break even numbers.

This does two things: 1) it tells you what you need to generate in revenue every day to break even, and more than that means profit; and, 2) it clues you in to the potential changes you need to make if you fall short on a daily or weekly basis. It is important, too, to be honest with yourself. You are in business to make a profit, and a price increase may be in order so you can continue to serve your customers and fulfill your dreams for being in business.

If you’ve been waiting, don’t wait much longer!!

As of 4/16/10, in the Main Street District of De Pere:

Confirmed Existing Business Locations (Main Street D.): 217
Current Known Vacant or For Lease Properties (Main Street D.): 33
Current Vacancy Rate: 217/33 = 6.58%

If you want to site your business in this area of superb demographics, great traffic, wonderful neighbors and tremendous plans for the future – you’d better hurry!

Check with our Buildings & Business Inventory to find the spot for you.

Heard on the street we need: a book store for the 18+ set (no! not an adult bookstore!), sporting goods, shoes, health and personal care, jewelry, and electronics and appliances

Return to vertical

An interesting article sent to me:

It’s déjà vu all over again for many of the world’s leading companies as vertical integration suddenly becomes fashionable again.

“It is back to the future” said Larry Ellison, the billionaire chief executive of Oracle Corporation, as he describes his firm’s expansion beyond its core software business. Ellison is leading the revival with his planned acquisition of Sun Microsystems which will make the firm a source for software, computers and computer components. Other companies that are becoming more vertically integrated through strategic acquisitions include steelmaker ArcelorMittal, PepsiCo Inc., General Motors Company and Boeing Company.

Vertical integration was widespread 100 years ago as companies sought to control all aspects of their operations –– from materials to manufacturing and distribution. Today’s move toward vertical integration represents a dramatic change from just a few years ago, when major corporations jettisoned non–core operations in an effort to increase efficiency and quality. In the 1980s, for example, steelmakers sold their mining operations. More recently, major auto makers spun–off their parts suppliers. As recently as two years ago, Oracle’s Ellison vowed to focus solely on software.

“The pendulum has shifted from disintegration to integration” summarizes Harold Sirkin with the Boston Consulting Group. Sirkin cites three factors for the change in strategy: unpredictable commodity prices, financial pressures at suppliers and the need for new sources of revenue. The recession, Sirkin notes, has accelerated the trend from specialization to integration.

Much of the impetus is being driven by manufacturing companies that want to control their supply chains and product quality. Case in point: Boeing which pioneered an extensive outsourcing strategy for production of its new Dreamliner aircraft. While Boeing insists that it is committed to outsourcing, it has been acquiring key Dreamliner suppliers over the past two years in response to quality problems. Last month, Boeing acquired the fuselage subassembly operations in Charleston SC from Global Aeronautica. Another example is General Motors which recently assumed a minority stake in Delphi Automotive LLP to maintain supply after originally shedding the parts supplier in 1999.

Vertical integration also can generate cost savings. By purchasing a major scrap–metal processor, steelmaker Nucor Corp. will be able to better control inventory, saving $100 million per year.

The trend is now becoming more commonplace in the technology industry. Leading tech firms are seeking to “vertically re–integrate,” after a long period of innovation and specialization according to one analyst. With its 2008 acquisition of a chip maker, Apple is moving back into the semiconductor business in an attempt to protect key technology from reaching its rivals. Hewlett–Packard and Dell Inc. have also made strategic acquisitions to control more of their market.

After years of promoting what he called the “horizontal computer industry,” Oracle’s Ellison is perhaps the leading proponent of vertical integration in the tech industry. Ultimately, he wants Oracle to become a one–stop shop for corporate customers who don’t like to deal with multiple vendors.

Both the Federal Trade Commission and the U.S. Justice Department closely scrutinize vertical acquisitions. Nonetheless, the economic development community should recognize that corporate strategy is shifting again in response to changing global economic conditions.

Source:

“Companies More Prone to Go ‘Vertical’,” by Ben Worthen, Cari Tuna, and Justin Scheck. The Wall Street Journal. December 1, 2009.

“Boeing cements its hold on Charleston 787 complex” by MarketWatch. As seen in the Seattle WA Times. December 22, 2009.

3 Rules to Attract New Customers

It’s nice when you can open a business and attract new customers the next day. It’s great when a web site
guarantees your profitability. But none of those things happen without good planning. Without a good plan, and
the proper execution, businesses die very quickly.
3-RULES TO ATTRACT NEW CUSTOMERS

1. Let people know you exist – Advertise and market yourself — don’t forget social media. If people don’t know where you are and what you do, they can’t buy from you. Advertising and marketing greatly increases your chances of success.
2. Don’t scare the customer – Make the customer feel comfortable with your product, service or services.
   Provide an environment that they will feel safe in. Make them feel good about spending their money.
   I walk by stores all the time that are open, but look very dark inside. That doesn’t make me feel like going inside. You can’t attract new customers if they are not comfortable with you.
3. Look the part – Businessmen wear suits. Policemen carry guns. You are reading this article because we look the part. We effectively display our ability to attract new customers. You can do the same when you look the part.  If you were going to buy tools, you would expect a guy with a tool belt and a smock to help you out right? After all, he looks like he knows what he’s talking about. What if you went to go buy a power saw and a lady in a clown suit asked if she could help you? Exactly. Look the part and you can attract new customers without any problems.

From Barbara Wold’s newsletter