Mentors – Free Small Business Consulting

One of the best ways to start and grow a small business is to get expert advice. I’m not referring here to paid consultants, a luxury that most early stage and small companies can’t afford. (When you can afford the right ones, by the way, they can be an excellent investment.) Instead, I’m referring here to getting a mentor of one kind or another.

I did 27 in depth interviews with successful entrepreneurs in writing my book, Low Risk, High Reward. They came in all flavors and sizes. When I asked them what factors they would attribute to their success, the almost unanimous answer was that, early in their career, they had a mentor. Bud Pironti of NSI, a direct response company, was particularly passionate on this subject, and he credits a great deal of his early and continued success to the mentors he’s cultivated over the years. (His wife accuses him, jokingly, of “collecting antique men.”) Bud stresses that you have to work at these relationships. If you’re sincerely humble and solicitous, he says, you’ll get back your investment five times over.

What does this mean? It means simple things like saying thank you to your mentor and following up to let that person know what happened when you pursued that lead he gave you or when you tried out that idea she suggested a few weeks ago.

Where do you find mentors? The answer is, “Lots of places including unexpected ones.” The senior managers of your suppliers may be fertile ground, or perhaps people you’ve worked with in the past, or college professors, or publishers of industry magazines. Entrepreneurs who own their own businesses are ideal mentors. They’re easier to approach than many corporate managers, and they’ve already been through much of what lies in store for you. Join your local Chamber of Commerce and be active. A mentor-in-waiting can be there.

“Surround yourself with people,” entrepreneur Earl Peek advises. “People whom you can call upon for different things. Get someone you can bounce things off of—someone you trust. Get someone with scrapes on his knees, someone who’s lost something. The best advice you can get is from someone who’s been through something bad.”

Again, mentors are everywhere. Think about the people you respect. Can you call upon one of them for advice? Could you build on that relationship over time?

When I talk to young people at business schools who want to start their own companies, I often feel their intense frustration at not having experience and having no way to get the experience they need. (You have to have a job to get a job as the old Catch-22 goes.) But I tell them that youth and inexperience are actually great cards for them to play. There are lots of experienced, successful business people who are more than willing to help young entrepreneurs if they are approached respectfully. They want to help, and they know that in many cases, teachers learn as much as students.

Another mentoring possibility is SCORE, which is a non-profit, founded in 1964 and funded in large part by the Small Business Administration. Go to www.score.org to find a chapter near you and how to access their free advice.

A major source of free advice is a Board of Directors—or the equivalent. I use that qualifier because if you’re a small business, you probably don’t want to incur the cost of directors’ insurance. (This is a must if there are other stockholders involved.) To get around this, call it a “Board of Advisers.” But this name change doesn’t mean you should take the creation of such a board lightly. No, this board doesn’t have the right to get rid of you and hire your successor—as does a formal board of directors—but you should consider it a serious obligation nevertheless. Run it in a formal way, and make sure it deals with the same matters as a traditional board of directors. (In most cases, this means policy-level questions rather than operational issues.) Share the numbers. Put together a binder of relevant materials, perhaps including both historical information and forward-looking material, and prepare an agenda. Then send it to the Board well in advance of the meeting. Don’t think you are too small for a board.

You can solicit retired executives or entrepreneurs, suppliers or anyone else whom you respect and who might have skills or knowledge that would complement your own for board members. Offer to pay their expenses and—when you can afford it—a nominal fee. (If you make products, think free samples!) Do everything necessary to make this work for you. It’s a great discipline, and it can help you focus on tomorrow’s problems. Be prepared to take criticism. Remember: that’s why you invited them.

Depending on where you’re located, there may be other similar resources available to you. If there aren’t, try thinking a little “sideways.” Is there an inventors’  or entrepreneurs’ club in your city? Maybe you’ll find some kindred spirits there—or at least, some original thinking. Find other entrepreneurs to talk to! Keep Learning!

Writing Business Plans-Anyone Have a Pencil?

The smartest entrepreneurs plan on growing and are prepared for change.

I have a few words of advice for first-time entrepreneurs, as well as seasoned business owners looking to hit a new stage of growth. My advice is this: write your business plan in pencil. I realize this may be difficult for all you non-golfers, but doing so will illustrate two important principles.

1. Change is inevitable.   

I have little doubt that you (the small business owner) will shortly have to change, amend, modify, scrap, or abandon your original business plan altogether.  One of the attributes of successful entrepreneurs is Flexibility. By writing your business plan in pencil, it forces you to look at change as the only constant.  Make change your friend, embrace it, and work it to your benefit. The reasons why your original plan will need to be changed after your company is actually operational are myriad. It’s likely you under or over-estimated your competition, margins, cash needs, competencies, and suppliers. Or you misjudged market need and size. Every entrepreneur discovers new opportunities that didn’t appear until there was actually a business up and running.

2. We must avoid business plan worship.

When we see documents neatly typed and even praised, we are reluctant to change. Especially for those who attended business schools where the plan took on a larger than life importance. People whose plans got high marks or even worse, won a Business Plan contest, tend to feel their plan is inviolate. They also tend to believe that if they rigorously adhere to the plan, it will yield the riches of their dreams. It Is my hope that the mental image of a pencil will remind you that change is good and will help you reach your goals.

Most small business owners that I know never wrote a business plan. In 16 start-ups, I never wrote one. John Altman, a very successful entrepreneur, founder of six companies, and former professor of Entrepreneurism, never wrote a Business Plan for his start-ups either. Most people who write a business plan do it to raise money or because someone told them that’s what they’re supposed to do. The fact is that a detailed plan is only required if you want to raise money from a bank or venture capitalist. Both will hardly ever offer a loan or invest in early stage companies. So your energies are wasted writing those long and thick plans.

Now don’t get me wrong. I strongly believe in planning, just not in long, voluminous tomes, that will probably go unread. For sole proprietors or a few employees, it can be in your head or- if you must commit it to paper- on a napkin.

If you really want to write a plan, try this. At the start of each year write your goals are for that year and specifically target new areas of distribution and the names of new accounts that you want to sell. Also put on paper the names of current customers with whom you want a deeper relationship and the strategies you’ll employ to do so. This plan should only run one or two pages. I also recommend you write down your accomplishments and shortcomings from the previous year. While you can do this exercise primarily for yourself, I would also share it with members of your team.

As your company gets bigger, written planning documents become paramount. As your company grows, you want to be sure all your employees are on the same page and equipped with the knowledge of how they can contribute to the company goals.

It’s a reversal of commonly accepted logic to suggest you postpone the business plan until you’ve reached a growth spurt. But as John Altman said on this point, “If you’re going to empower the other people in your company, guess what: You’d better give them a map to the highway you’re on! Otherwise, they can’t share that vision in your brain.”

Sales Reps and How They Benefit Small Businesses

I was a national sales rep for 14 years before switching sides and founding or co-founding 16 start-ups, one of which made the INC 500 list three years in a row. . .So, I feel qualified to speak on this subject which I think is misunderstood and not taught at school. This is why I’ve written a comprehensive and practical Guide to Help Sales Reps and Manufacturers understand each other better, to create a positive partnership that will yield more profits for each, and to extend the duration of the partnership.

Too often this relationship is adversarial. It shouldn’t be, as both factions need each other.

Before I discuss the highlights of this Guide, I think I should define what a Sales Rep is.

A manufacturer’s representative, also known as a sales representative, sales agent, a broker in some industries, or simply a rep, is an independent business person who acts as the sales arm for one or more businesses which are comprised of one or more products or services. Most Reps are paid a commission for their sales efforts rather than a salary. Some Reps are permitted to take a draw (or advance) against commissions; others are not. They are responsible for their expenses. The commission can vary greatly–from 2 percent to 20 percent.

Basically Sales Reps are Entrepreneurs in their own business. It is important to understand this as you can’t order them to do something. You need to sell them on your integrity, agenda, company, product, and vision. To do this effectively, you should understand how they think, their strengths and weaknesses, and the environment they work in. This Guide should help you with this to achieve a more productive relationship with them.

 

Here are some of the subjects covered in this Guide:

 

Compensation

Reps are primarily paid on a commission basis although in some industries, such as Pharmaceuticals, they receive a base salary with performance-based bonus. The wide spread of commission rates (2%-20%) is based on a variety of factors explored in the Guide.

 

Who Becomes a Rep?

There is no Sales Rep gene, and they come from all walks of life and choose the profession for different reasons. They want to be their own boss, they see the opportunity to earn a lot of money as there are no ceilings on their compensation, they know that they can choose which 12 hours a day they want to work, etc.

 

Why Work with a Rep?

There are two perspectives on this question: that of the manufacturers and that of the customer who the Rep is selling. Both are covered in detail, but the two main reasons for a manufacturer are they get an experienced salesperson with no fixed cost and quick access to desired customers who are difficult to reach.

The Buyer among many reasons prefers a Sales Rep because they trust them more as they know that the Rep depends on them for a living more than the manufacturer does, and the Rep is more accessible.

 

How to Find and Select a Rep

Before you begin the process, you need to think through what you expect from a specific Rep, the kind of characteristics he or she should have, their customer base, the other lines they carry, and much more. Finding the right Rep is a difficult task and there are numerous approaches. My most productive methods were to ask Buyers on whom the prospective Rep calls. They are a gold mine of valuable information to help you in your quest. They not only can identify the most successful Reps that call on them but lead you to the most promising newcomers that are not on everyone’s radar yet. They will be able to give you more time and passion Second: I checked with other good Reps that we knew. Reps network with each other and know the difference between good and bad ones. Today with the advent of the internet and the comprehensive searches you can do, I discovered a site www.rephunter.net that matches up Sales Reps and Manufacturers to each’s specific needs. They are very professional and worth a look see.

 

Rep and Manufacturer Complaints About Each Other

There is a long list of complaints each party has about the other. I believe it’s very helpful to understand what these are. They can help you to help each other, which will profit everyone. The list of complaints that I enumerate are valid and not readily apparent to the other party. If taken seriously, each party can improve the running and effectiveness of their company. Basically, there is a healthy amount of distrust on both sides. A lot of this stems from many of these easily correctable complaints. Trust is the pillar on which effective relationships are built. With it this Rep/Manufacturer relationship should have a long life.

 

Training Reps

Most manufacturers give short shrift to the training of a new Rep. They make the mistake of sending out catalog sheets or directing them to their website and maybe supply some samples and expect the orders to roll in. . .not a formula for success. Would you train a new full-time hire in so casual a manner? The Guide offers solid and proven ideas on how to accomplish this training.

 

A Tip for Reps

This section offers an idea for Reps on how to solve a problem many Buyers have and in doing so earn themselves more sustainable earnings.

 

Advice for Both Parties

Here we offer key suggestions to both sides on actions and attitudes they should adopt to make this Rep/Mfr partnership more effective (Profits and Fun). We also address how to deal with the problem created periodically by many large customers who tell their buyers to stop dealing with Reps for the mistaken reason that more profits (the Rep’s commissions) will accrue to them. We offer what we did as national reps to solve it.

 

The Future of Reps

There are many outside world trends, including technology that indicates that reps may become extinct. I don’t think so if the parties will work closely and with honesty. . .but it helps to take a step back and think about planning for the future.

 

This Sales Rep/Manufacturers Guide is FREE, and you can get it by going to http://www.bootstrapping101.com/pages/guide.html.

Where Not to Look for Money — And Where You’re More Likely to Find It

Entrepreneurs can save time and angst by looking beyond banks and other mythical sources of startup capital.

One of the major obstacles entrepreneurs face in starting a business is raising the money they need. It can be the most time-consuming, frustrating and disheartening factor in launching a new venture. Save yourself some energy and angst by not looking to sources that conventional wisdom would suggest as logical places to find startup capital. Instead, focus on more realistic prospects.

Here is a list of places you shouldn’t be looking for money, followed by where you’re more likely to find it.

Banks
At first blush, bypassing banks may sound crazy — that’s where the cash is. Banks also offer one of the least-costly sources of funding. But banks generally are not interested in lending to start-ups. They seek out established borrowers with a credit history that can help them determine their risk and the probability of being paid back.

No matter their lending criteria, which can vary, banks won’t lend to a start-up in most cases unless the principals sign a personal guarantee and have assets to back up the loan in case of default. Bankers focus on the negative side of new ventures: How can I recoup my money if the business fails? Their depositors do not expect them to risk their money. For this safe approach, depositors are satisfied to receive a lower return on their money.

Venture Capital Firms
VC investors can receive tremendous publicity about their big hits with famous high-profit companies. But they expect that most of their investments will fail. Perhaps two out of 1,000 plans a VC looks at will be chosen for investment. VC investors focus on how fast the company can grow and how big it can get.

Before investing in a company, venture capitalists generally want to see:

Proven successful owners

  • A team of experienced people
  • A business plan whose idea is likely to win out against strong competition
  • The potential for high growth and profit within five years

What’s more, VCs typically insist on a large equity position and the ability to take over your company if you can’t make your projections.

Credit Cards
The media can tend to glorify the rare individual who starts a company on credit cards. It is a route I would not recommend. Credit cards are debt, not an investment. If you are a start-up or small business not yet earning a profit, it’s important to think through how you would pay off the credit-card debt. The odds are good that you won’t, and you will end up with a poor personal credit rating and a frayed relationship with family members you are supporting.

But if you earn a profit and need only a seasonal infusion of capital, then credit-card debt might be a feasible option. One caution: Their interest rates are typically very high.
Keep tomorrow in mind. Starting a business that fails is not fatal to your future. It can be a learning experience that future potential investors usually don’t hold against you. But a spotty personal credit rating can damage your prospects.

Family
Those closest to you can be a good source of money for start-ups. They know you, are on your side, and aren’t as likely to scrutinize your plan like outsiders would. But think twice before accepting family money if you feel the family member cannot afford to lose it and also does not fully understand the risks.

If you don’t look for startup funding from banks, venture capitalists, credit cards and family, you’ll save a lot of time and aggravation. Of course, with some success behind you, these sources may one day be perfect sources of financing.

Where to Look for Startup Funding
Here are some places where you may be more likely to secure the money you need for a new venture.

  • Creative savings. Carefully analyze all your money needs and think creatively about how you can get things for nothing or at a lower cost. This review may not be as difficult as it sounds. For instance, consider bartering and ways to lower your overhead expenses. Look for ways to outsource tasks since this can convert a fixed expense into a variable one and you’ll pay for it only when you make a sale. Accomplishing things without using cash is the same as getting money — with the advantage of not paying interest or giving up equity.
  • Angel investors. These backers tend to invest smaller sums and take less equity than venture capitalists and usually make a more meaningful noncash contribution to your survival and growth, such as advice and introductions to others who can help you.
  • Partner suppliers and customers. No equity is involved in these deals, but your objectives are achieved without paying cash. For example, if you have a product that you sell through retailers or work with regular suppliers, make them an exclusive offer, such as a specific time period for free advertising or an agreement to purchase on extended payment terms.
  • Reinvested profits. Scale back on your plans for quick growth and focus your efforts on organic growth where your profits are reinvested in the business as a substitute for raising capital. It is a slower approach, but it can be more profitable and less of a strain on you and your company’s well-being.

This is from my column for Entrepreneur.

7 Tips on Barter for Small Business

Barter, an $8-12 billion dollar industry, is one of the businesses that flourishes in bad economies, as it offers entrepreneurs many opportunities to acquire things they need and want for no or little cash. Here are some of the things you should know about Barter, a great Bootstrapping activity.

1. It is the exchange of goods and services for other goods and services with little or no cash involved.

 

2. Small Businesses exchange almost every imaginable product or service like medical services, media, landscaping, clothing, food, real estate, legal services, toys, cruises, cars, hotels, etc. The list goes on forever.

 

3. The advantages of Barter are:

    You receive goods or services you need without paying cash.

    You receive full retail value for what you are trading which enhances your balance sheet.

    It allows you to utilize your excess capacity or time.

    Can help you get new customers from the company you bartered with as they will continue to buy from you for cash when they run out of credits, if they are pleased with your offering and service. This satisfaction generates the most effective form of advertising: word of mouth which will get you new customers.

     

    4. Most Barter works through exchanges who locate the buyers for you and offer the huge range of products you can acquire through the trade dollars you get when you sell your product. This way you do not have to find buyers for your products as they did in the early days of Barter.

     

    5. You pay a fee of about 12% to the exchanges for their services. Most exchanges charge to join.

     

    6. All Barter transactions are taxable.

     

    7. To locate the Barter Exchange that best fits your needs, go to a major search engine and type in Business Bartering or go to www.irta.com, the Industry Association.

      Entrepreneurs Love Risk?

      This myth seems to emanate from the media portrayals of entrepreneurs, likening them to old gun slinging, sneering, arrogant cowboys just looking to find and attack risk. My experiences and those of most successful entrepreneurs I’ve met indicate the exact opposite: small business owners with their own money on the line look to minimize, avoid, share, or make risk disappear.

      Every time I think of this topic, I’m reminded of Professor Howard Stevenson’s remarks on the subject, essentially saying, “have you ever met an Entrepreneur who wakes up in the morning, bounces out of bed, and says, ‘What a great day! Where can I find risk?’”

      I think risk, like beauty, is in the eye of the beholder. By that I mean that risk looks and is different when viewed by an outsider and an insider. An insider is one with good general business experience, and specific industry expertise. This person does not perceive certain risks because he/she knows their way around the risk minefields that the outsider cannot see. Successful business people do their homework to understand given situations. The more knowledge they bring to bear on a situation, the less risky it is. It’s a little bit like throwing more wood on the camp fire: more and more space around the periphery gets illuminated, and it becomes clear that –at least as far as you can see—there really aren’t any wild animals out there. I like Gourmet Coffee marketer Dennis Boyer’s take on this subject. He says, “I think entrepreneurs have a talent for capitalizing on opportunities that have a lot of perceived risk, but because his math is a little more insightful, those risks aren’t quite the same as those for those who see the situation from the outside.”

      That is not to say that there are no business risks out there. Of course there are, but the smart businessperson seeks to identify and understand the risks inherent in a given situation. If the risks are too big and can’t be managed, and the risk/reward ratio is out of line, the good entrepreneur will most often walk away.

      I also think many business owners do not delineate between Risk to the Business and Risk to One’s Ego. Risks to the business and the assets behind it are real and should be scrutinized with concern. By Risks to your Ego, I mean fear of being rejected by a potential buyer, loan officer, licensor, or whatever. Those should not be confused with Risk to the Business.

      A rejection is not a failure. It should be viewed as an opportunity to learn. Successful entrepreneurs have the self-confidence to face all these ego risks and to put their energies into reducing or avoiding risks to the business.

      10 Tips to Build Better Trust in your Business

      Trust Builds Confidence

       

      The single most important thing you can do in starting and building a business is to get people to trust you. Trust needs to be earned and takes time, although you can lose it in a second. Telling people to trust you doesn’t cut it. In fact, when people I just meet tell me to trust them, my antennae is up to watch my back.

       

      The benefits of being trusted are enormous. People have confidence in those they trust. Confidence leads to wanting to do business with you. Employees want to work for trustworthy bosses and are more highly motivated when they do. Customers are more likely to write orders for sales people they trust. Investors and lenders will not write the check to anyone they suspect is not high on the trustworthy ladder. A great deal of their due diligence is in finding out your trust score. And in my opinion, the most important thing about being trusted is that you live a better life. The only way to teach your children about trust is to set the example for them.

       

      You should always do the right thing. Most people know right from wrong but are compromised when money is at stake. Many people differ on what is right or wrong in a business situation. It takes lots of little things and time to build trust. Some people never even think about it as they instinctively do the right thing. Here are 10 specific trust building ideas to get you thinking in the right direction. There are many, many more.

       

      10 Tips to Build Better Trust in your Business

       

      1.  Listen to people you deal with.

      2.  Admit mistakes right away.

      3.  Pay bills on time. If you can’t, call and tell why and when you will pay. Give a date

      you can meet or beat.

      4.  Acknowledge what you don’t know. Don’t BS.

      5.  Don’t duck or procrastinate dealing with a problem.

      6.  Demand quality.

      7.  Don’t over promise.

      8.  Move quickly to correct mistakes no matter the cost.

      9.  Keep your promises.

      10.  Never betray confidential information.

       

      Bootstrapping 101 lists 38 trust building ideas.

       

      Also, remember trust is portable. Wherever you go, it follows you: good or bad.

       

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