THE MISSION STATEMENT–Good For Small Businesses Too

The mission statement is something very different from the business plan. Mission statements set the moral and human goals to which your  company is supposed to aspire. In many cases, they also state higher order business goals, such as a corporate commitment to maintaining an annual compounded rate of growth of a certain percentage.

Mission statements are most often associated with large corporations—an effort to get thousands of people to pull in the same direction across a far-flung corporate empire. But I think a mission statement is a good thing for a small business as well, and it’s something that should be developed at the outset.

The mission statement clearly tells employees what behaviors are expected of them and describes the kind of treatment they can expect from their employer. Most people have a strong desire to know the rules of he game. In addition, they want to be proud of the company for which they work. The mission statement gives them at least one piece of the puzzle.

This is also the best reason not to have a mission statement if you don’t intend to follow it. There’s nothing more poisonous than to have the management thumping away on some ethical tub, and at the same time acting in ways that directly contradict the espoused values. If you can’t walk it, don’t talk it!

The mission statement, like the business plan, is a useful tool for triangulation and mid-course correction. Take it off the shelf every once in a while, and see if you’re living by it. (Better yet: look at the framed version on your office wall.) And when you face a tough choice, look at that statement again for guidance. To the extent that your mission statement contains concrete business goals, make sure that you either (1) achieve those goals, or (2) acknowledge that you aren’t achieving them and take steps to bring the company’s performance into line with its aspirations.

You may not spend a lot of time on your mission statement, but you should clearly set the tone for the kind of company you’re trying to create and sustain. Culture comes from the top—that is, from you. How accessible will you be to your employees? Will you truly listen to their input, or will you just pay lip service to their ideas? What are your expectations from everyone, especially in the realm of building trust? How will your company treat its customers? What are its attitudes toward quality?

Part of the point of the mission statement is the process as well as the product. If you involve other people in the development of the mission statement, you’re already sending a signal about your culture.

If disputes arise, how are those disputes resolved? Do people walk away feeling that the resolution was fair, smart, and efficient? Again, your personal example is extremely important here. One of the best ways that you can inculcate values into the fabric of your company is to embody those values.

Don’t Overlook Your Suppliers

Don’t overlook your suppliers–they are hidden assets and can help your business grow.

Your approach to suppliers needs to be part of your strategic plan since almost every company, whether product- or service-oriented, is dependent on suppliers. Many business owners seem to get this supplier issue backwards. They think that because they write the order, they’re in the dominant position and can exploit it with unreasonable demands, including personal perks.

Let’s get this right–you need good and reliable suppliers. When you find them, treat them like gold. Work as hard on building a good supplier relationship as you do building a relationship with your customers.

And be loyal to your good suppliers. They are essential to your business’s good health and growth. They are a nuanced bootstrapping strategy.

Let’s briefly look at all the ways suppliers can impact your company.

  • Quality: Supplier components can positively or negatively affect the quality of your product. Higher quality increases customer satisfaction and decreases returns, which adds cash to your bottom line.
  • Timeliness: Their timely deliveries are crucial to how customers view your reliability. A quick turnaround can become the key to minimizing your inventory, which in turn translates to less risk of inventory obsolescence and lower cash needs.
  • Competitiveness: They can give you the one-up on your competition based on their pricing, quality, reliability, technological breakthroughs and knowledge of industry trends.
  • Innovation: Suppliers can make major contributions to your new product development. Remember, they live their product more than you do; they’re working to be on the cutting edge of innovation for their product. The good ones will understand your company, its industry and needs, and can help you tweak your new idea.
  • Finance: If you’ve proven to be a considerate, loyal and paying customer, you may be able to tap into your suppliers for additional financing once you hit growth mode–or if you run into a cash crunch. That financing may take the form of postponed debt, extended terms on new purchases, a loan, or an investment in your company.
    All of these improve your cash position.

It’s OK to Be a Demanding Customer
Having said how valuable and important a supplier can be to you, I’ll now say that you should not be a patsy. You can be a demanding customer–just be fair. State your quality and time needs clearly. Hold your suppliers to their agreements. Make sure they stay competitive. Tell them you never expect to pay higher prices than other purchasers.

There are times you need to replace a supplier because you have outgrown them and they can’t perform to your new expectations. Before dropping them, however, you might try to help them change to keep up with you.

It’s not prudent to rely on one supplier. If that supplier has a strike or a fire, you don’t want to be in a position where you’d be shut down too. So keep a second or multiple suppliers on hand, and don’t be embarrassed to tell your key supplier that you’re doing so. They will appreciate your honesty. If your supplier is savvy, they’ll also know that you need backup suppliers on key products and services if you ever plan on raising money (lenders are sure to ask that question).

How to Be a Valued Customer
These ideas assume, of course, that you are a customer that somebody out there wants. In order to be a valued customer to your suppliers, here are a few things you should do:

  1. Always pay on time. For the sake of emphasis, I’ll repeat this one: Pay your bills on time! You can negotiate for favorable payment terms before you place an order, but once the order is placed, don’t renege or attempt to change the rules. If you can’t, call up your suppliers and tell them why and when you will pay. Don’t play games with suppliers’ cash. You’ll be absolutely amazed at the goodwill and benefits you will earn by observing this simple rule.
  2. Provide adequate lead times. Try to give suppliers as much lead time as possible on your orders. Unless there’s a good competitive reason not to, share with them an honest projection of your needs, and keep them abreast of any significant changes in that estimation. When developing your lead times, it helps to be knowledgeable about your suppliers’ production methods and needs.
  3. Personalize the relationship. Visit suppliers’ offices. While you’re at it, include them in some of your strategy meetings. Invite them to break bread and invite them to your office parties and picnics.
  4. Share information. Keep the good suppliers aware of what’s going on in your company. Tell them about changes in key personnel, new products, special promotions and so on. Many times, you’ll find that good suppliers can be help you find new customers.

Developing good relationships with suppliers is not a complicated process. Be communicative, tell them of your needs and standards, treat them fairly, be demanding, be loyal, and pay them on time. It’s that easy.

This article was written for entrepreneur.com April 6, 2010

FIGHTING BACK AGAINST CREDIT CARD FEES

I recently attended an SBDC Small Business seminar and was surprised to discover how many small businesses were financing their businesses via credit cards. I understand the difficulty of securing money for start-ups and the passion of pursuing one’s dream to have their own business move them to the desperate act of securing high multiple credit cards to get started. I don’t understand this tactic unless you have cash flow to pay off the card balances. If you don’t, you will severely damage your credit ratings. Be that as it may, if you are going this route, be aware of the high charges awaiting you if you are late in paying your bills.

Here is an example I recently experienced with a major credit card company with actual numbers.

I was looking over an $881 monthly charge of my wife’s card before paying it and noticed an interest charge of $59.39 and a late fee of $39.00. (The card companies will argue that the late fee is not related to the interest charge, and I will advocate they are kissing cousins as both are triggered by the one act of receiving the payment late. It seems obvious that the card company uses this tactic to show a lower interest rate.)

Moving on to the math using their interest charge of $59.39, this is an interest of 6.73%. This doesn’t sound too bad until you realize (which they hope you don’t) this is for one day only. Amortized it comes out to 2,456%, an astounding number. I thought this was against the usury laws, but I was to learn it is not. In fact, new credit card laws that go into effect this August change some credit card practices, but they do not limit how high interest rates can go. I asked my wife to call the card company and ask how late the payment was. She was told one day, which in effect, was the full 2,456% rate. If we add the $39.00 late fee, the annualized charge is 4,072%. After I did this math, I asked her to call again and tell them this charge for one day late was unfair, and they did not hesitate to immediately tell her they would void both charges. I have always found if you phone and politely voice your unhappiness over their outrageous charges, they will yield and adjust or eliminate them. Of course, if you are very late on a consistent basis, the outcome may be different.

Knowing that card companies generated $20.5 billion in fees in 2009 and that few people challenge them, they would rather void some charges so as not to shine the spotlight on this lucrative source of income.

There are some other variables in this transaction in that you are at the mercy of the card company in knowing about how long did it take for the mail to get to them. One day, seven days? Also, how long did it take for them to process and enter the payment on their books?

A small piece of good news is that the new law states credit card companies must give consumers at least 21 days instead of the current 14 to pay their monthly credit card bills.

So, make the call, endure the phone wait, and challenge the charge. Every bit helps when you are fighting for survival and profits.

BUSINESS INCUBATORS CAN BE A START-UP’S BEST FRIEND

If you are a start-up company and you qualify, incubators can be a fantastic resource for you in your pursuit of success.

Here is the NBIA (National Business Incubation Association)’s description of Incubators. “Business incubation is a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding.”

Critical to the definition of an Incubator is the provision of management guidance, technical assistance, and consulting tailored to young growing companies. Incubators usually also provide clients access to appropriate rental space and flexible leases, shared basic business services and equipment, and assistance in obtaining the financing necessary for company growth.

Incubators are physical plants that  primarily house the offices of start-up companies. They will rent you flexible leases, which can allow you to expand or shrink your space quickly. Rents vary by Incubator, but most often are lower than the market rates at the outset. As you grow, you can upgrade to more space. Fees are charged for some Incubator services and can vary by Incubator. Some have no fees but want equity in your company.

Incubators come in many flavors. Some are only for technology companies. Some are for a specialty technology. Some are mixed use while others are service or manufacturing oriented.

Here are some Incubator facts as supplied by Corinne Colbert, Director of Publishing at NBIA.

  • There are 1100 to 1200 Incubators in the United States.
  • 27% of Incubators have investment funds.
  • 70% have links to angel investors.
  • The average stay in an Incubator is 33 months.
  • About 6% of North American Incubators are for-profit programs.

Most Incubator tenants accept start-ups, as well as existing companies

Besides the above described advantages afforded to Incubator tenants, some other positives are:

  • Networking with other entrepreneurs.
  • Getting business from other tenants.
  • Getting assistance from specialists in the community to supplement on-site mentors.

Be forewarned: it is not easy to get accepted into an Incubator. You need to meet the criteria of the one to which you are applying. For sure, you need to prepare for your interview with a sound, well thought out business plan. These plans do not have to be lengthy dissertations. Succinct and short are good.

No matter the tediousness of the application process, an Incubator acceptance can be a defining moment in your future success.

To find the Incubators near you, go to the NBIA website: www.nbia.org. Their phone number is 750-593-4331.

(This blog is excerpted from Bootstrapping 101.)

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