Stephen Poorman
Previous Lock Haven Express articles offered topics for the budding entrepreneur and cautioned readers to be mindful of business problems. But perhaps a business owner doesn’t wish to close the doors or file bankruptcy? What if they prefer to face problems and navigate the business swamp?
Step one is to recognize culprits:
— Poor Image. People “judge a book by its cover” and that applies to companies and their names, image and logo. Before naming your bakery after your dog, invest time and money to develop a desirable brand and image. This seemingly simple step can easily bring about much success.
— Under-capitalization. While debt is dangerous, perhaps one could first apply to the Clinton County Revolving Loan Fund or City of Lock Haven for a business loan in the hopes of obtaining a lower interest rate. But at some point in time, a business requires money. Many entrepreneurs are too optimistic regarding revenue and capital projections. It is best to escrow six months of operating capital because events and circumstances seldom evolve as anticipated.
— Spending trust taxes. Payroll and sales taxes represent money the government entrusts one to collect and forward on; it is not a “rainy day” slush fund. This money belongs to taxpayers.
— Failure to negotiate. Everything is negotiable so one must aggressively negotiate purchases and apply my “92% rule,” found on page 40 of my book; this one “tip” could annually save tens of thousands of dollars.
— Ineffective or nonexistent marketing. Develop a Marketing Plan and stay within the budget. While social media is a unique strategy to make a business famous, all marketing is important and there are many inexpensive mediums to reach your target consumers.
— Ignoring customer needs and preferences. Communicate with customers and learn what motivates them. There must be intense interaction so you offer goods and services they need.
— Selling from an empty wagon. “Stack’em high, price them low, out we go.” Variety is the spice of business life. The more you have, the more you sell and it is important to monitor turnover ratios.
— Poor location. At times it is best to pay more rent per square foot than to locate in a low-traffic area. Perhaps purchasing your location could be a wise decision. There may be times to “nickel-and-dime” your landlord or seller and times to seize the location before competitors do.
— Failure to understand competitors. While Burger King might locate near McDonalds, or you may locate in a food court, generally speaking, competitors are not friends and competition is not healthy. The seasoned entrepreneur will borrow ideas, suppliers, employees and customers from competitors as they will not pay your rent.
— Spending other people’s money. When a lot of cash rolls in, the small business owner might conclude it belongs to them when in reality, perhaps less than 10 percent might be profit. Pay lenders and never redirect that cash flow to one self.
— Fixing things that aren’t broken. Perhaps this culprit should be No. 1. When an established business with key employees, loyal customers and desired products is sold, the cash stream becomes an asset with a value. Newbie entrepreneurs tend to incorporate their own name and concept as they “tinker” with almost everything only to watch revenue plunge. If you pay for a cash stream asset, apparently nothing is broken so be hesitant to fix it.
— Over expansion. There is a financial phenomenon known as “diseconomies of scale.” These concepts might be learned through courses at The Stephen Poorman College of Business. Because a first location is successful, it does not ensure the second or third will follow suit.
— Poor internal control. Accounting and insurance may be boring to some. But one must maintain a budget and follow the number. Financial statements are as important to the business owner as x-rays are to the surgeon.
To learn more about business problems and solutions, visit The Stephen Poorman Entrepreneurship, Business, Finance and Banking section on the first floor of the Ross Library to recognize “early warning signals,” and to allow time to “plug your canoe before it sinks in the swamp.” Those early warning signals will appear in an upcoming Business Brief in The Express.
Tri-Mark Publishing announced that a second edition of “Navigating the Business Swamp,” will soon be released on Amazon.com.
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Stephen Poorman is an author-entrepreneur and consultant who is certified emeritus by the Institute of Management Consultants.
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