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2010
SBC Team

Planning for the Worst

Posted by SBC Team May 24, 2010
How can your small business avoid or survive a disaster?

by Reed Richardson

As many small business owners in Nashville, Tennessee and along the coast of the Gulf of Mexico could no doubt tell you right now, disasters, whether natural or man-made, can and do strike anywhere at anytime. Or, as former SBA Administrator Hector Barreto noted recently: "No one is insulated from the threat of losses caused by wind, storms, floods and wildfires, power outages, and other natural and man-made disasters. These catastrophes should remind us of the need to be prepared, to have a plan not just to survive a disaster, but to recover quickly."

This last point is perhaps the most critical, since long after the rescue efforts have concluded, the waters have receded, or the environmental cleanup has finished, the devastating economic impact of most disasters will continue to ripple through the local business communities of the recovering areas. And that ripple effect exacts a heavy toll. In fact, research by the Institute for Business and Home Safety (IBHS) finds that one out of every four businesses forced to close their doors due to a major disaster never open them again. Businesses with no disaster plan in place ahead of time fare even worse, according to data from the Gartner Group, with 43 percent of those shuttered companies never reopening.

Small businesses are particularly vulnerable to disasters, since they typically have sparse resources, less reserve capital, and fewer employees and managers experienced at working through a crisis. Yet paradoxically, smaller companies also tend to be the least prepared when disaster strikes; surveys from the Gartner Group estimate that only 35 percent of small and mid-sized businesses have established disaster recovery plans. But by not preparing a survival and recovery plan ahead of time, small businesses could be inviting a greater disaster should a catastrophe befall their company.

 


Defining Disaster
While state and federal governments have very specific definitions of what constitutes a disaster--designations that have important ramifications for business owners viz a viz post-disaster aid and recovery funding--business owners should favor a simpler description when trying to prepare for the unexpected. "We suggest thinking of ‘disaster' as any event that prevents or interrupts your business from delivering its goods and services according to its customers' expectations," explains Diana McClure, Business Resiliency Program Manager for the Institute for Business and Home Safety (IBHS). This broader definition, she notes, captures more mundane--and much more likely to occur--events like structure fires, computer hard drive crashes, and sewer main backups, disasters that may not make national headlines but that can easily bring a small business to its proverbial knees.

What's more, small business owners should keep in mind that, in today's increasingly interconnected economy, your business could get blindsided by a disaster without sustaining any actual lost assets or physical damage. One clear example of this disaster-by-proxy scenario is currently playing out along the Gulf Coast, where thousands of tourism-based businesses as well as untold shrimping and fishing concerns have been effectively shut down by the ongoing oil spill that is encroaching upon the area's public beaches and territorial waters. "There's no insurance for that," notes Insurance Information Institute (III) vice president Loretta Worters.

Though the devastating financial losses sustained by these Gulf Coast businesses won't be covered by insurance, those companies may be eligible for governmental assistance precisely because the spill site has been declared a federal disaster area. Those now struggling small businesses along the Gulf Coast, for example, may be eligible for the Small Business Administration's Economic Injury Loan program, which offers up to $2.0 million in low interest loans per company. Businesses that have also sustained physical damage within a federally declared disaster area, like those recently flooded out along the Nashville waterfront, may also qualify for a SBA Physical Disaster Recovery Loan, which has similar terms. (For more on SBA disaster assistance, go to http://www.sba.gov/services/disasterassistance/index.html.)

 

Disaster Due Diligence
One common reason small businesses fail to adequately prepare for disasters simply involves a lack of time and manpower. "Large corporations usually have dedicated continuity planners or risk managers on staff, but in most small to mid-size companies, the risk manager is often the owner or CEO," McClure points out. Adding yet another task to a busy small business owner's inbox can make for a convenient excuse not to take up the project at all. But drawing up even a rudimentary disaster plan is well worth the time. "Half the battle is finding a sense of urgency and the value to doing the planning ahead of time," McClure adds.

One way to find value in disaster preparedness is to use the process to find additional returns on investment. "Many small businesses go through the process and, along the way, they identify ways to improve efficiency or eliminate redundancies in their business," McClure explains. Also, she counsels small business owners to think of disaster preparedness as a way to potentially enhance their business's reputation or gain a competitive advantage. "Wouldn't you like it if your company could open its doors days or weeks ahead of your competitors after a disaster strikes? And if it does, wouldn't that be something you could use to sell to new customers?"

Still, many small business owners may balk at the prospect of tackling disaster and continuity planning because they lack familiarity with the topic, McClure acknowledges. So to help smaller companies get started, her non-profit organization has developed "Open for Business," a free disaster preparedness and recovery guide that entrepreneurs can either download and print out or work through online. "Open for Business" allows small business owners to do a quick self-assessment of their current preparedness level and then follow up with a step-by-step guide that addresses topics like backup operations plans and alternate worksites, redundant vendor sourcing and remote data archiving, emergency safety procedures and employee contact lists, and even crisis-based public relations tactics. "It forces your business to think about every one of its obligations-legal, regulatory, financial, contractual-and the time frames associated with each," McClure notes. (To view IBHS's "Open for Business" guide online, go here: http://www.disastersafety.org/text.asp?id=ofb_main or to download the pdf version, go here: http://www.disastersafety.org/resource/resmgr/pdfs/OpenForBusiness_new.pdf.)

 


Unraveling your insurance needs
For any business, a particularly critical element of disaster preparedness involves insurance coverage. "A lot of small businesses have nothing more than a standard business owners policy, or BOP, which often has some basic coverage for business interruption included," McClure notes. Business interruption coverage, or extra expense insurance as it's also known, helps defray repair expenses, ongoing operating costs, and lost profits for a set amount of time after a disaster (usually ranging from three months up to one year). "But it's important to talk to your insurance agent about your individual business's needs ahead of time so that you don't find out you lack adequate protection after the fact," she adds.

This can be especially true for very small and home-based businesses that haven't yet insured their company. "Small, home-based businesses are typically trying to save money by going without any kind of insurance coverage, but they're operating under a false sense of security," says the III's Worters. "That's because losses from a disaster for a home-based business are not covered under a standard homeowner's policy."

Similarly, small companies that rely heavily upon a single vendor or hard-to-source component might be lulled into thinking that their current insurance policy will adequately protect them should a disaster suddenly shut down their key supplier. But it won't. So, for those businesses with a greater inherent risk to their supply chain, experts like Worters recommend buying contingent business interruption insurance. This coverage will inject cash flow into your business during an unexpected vendor drought, helping you literally keep the lights on and, if necessary, locate an emergency alternative supplier.

"If you fail to plan adequately for a disaster and how to stay afloat afterwards," concludes Worters, "almost no business will be able to sustain itself for more than a year or two if it has been badly damaged."
Bonuses and profit sharing

By Christopher Freeburn

 

One of the most important tasks facing every small business owner is keeping his or her employees well motivated. Happy, well-motivated employees work harder and longer. But the benefits to your business go far beyond simple increased productivity. Indeed, for very small businesses, happy employees are absolutely crucial to success. In smaller workplaces, individual employees have a greater impact on the overall business because each employee typically wears so many different hats. Additionally, your employees' attitude toward their jobs and your business will likely be perceived by your customers, who will then form opinions about your business based on their interaction with your personnel.

Bonuses
One obvious way to motivate employees is by providing some form of additional compensation for specific performance. This is usually called a bonus. Bonuses can be dispensed for achieving some overall goal--a certain percentage improvement in yearly sales or volume of product produced--or for more narrowly defined tasks, like the completion of a specific project.

Bonuses can be handed out on an individual or group basis. Many business owners assume that handing out bonuses on a group basis will forge a spirit of teamwork and camaraderie among their employees. But often, the opposite can occur. "There is some danger in awarding group bonuses," cautions James Sheridan, a Boston-based financial consultant. "When a bonus is handed out on a group basis, it can accidentally increase office tension by pitting employees against each other."

If the group encounters difficulties meeting the required goals, for example, employees who were anticipating the bonus may begin blaming other employees for the problems. Likewise, if some employees feel that some members didn't contribute fully to the overall team's achievements, the bonus program may end up being perceived as unfairly rewarding the weak at the expense of the strong. "Instead of a smooth functioning team, you might end up with a bitter, divided group of employees, each blaming the others for failing to meet duties."

This danger is avoided by handing out bonuses on an individual basis. "Not only do you avoid creating unnecessary tension in your office, but you increase the personal loyalty of your best employees to you and your business," says Sheridan.

Profit-Sharing
Another way to reward employees for their efforts is to create a formal profit-sharing plan. Under such a plan, a business owner designates a percentage of the business's pre-tax profits to be distributed among the employees. Profit-sharing plans are regulated by federal law and must meet contribution and reporting requirements. Unless otherwise specified by the company, any employee who has worked 1,000 hours or more for the business over the preceding year is eligible for such a plan. The business's contribution can vary from year to year, but it is generally pegged at a value between 20% and 25% of net profits. (To download a sample profit sharing plan, check out the U.S. Chamber of Commerce's Small Business Nation website here: http://www.uschambersmallbusinessnation.com/toolkits/tool/profit_m)

"The benefit of a profit-sharing plan is that it can increase employee loyalty to the company by tying compensation directly to the company's bottom line," says Sheridan. "If the company does well, so does the employee." This can motivate all employees to work harder since it lets them know that going the extra mile for the company will ultimately be rewarded. It can also provide them with a sense of ownership of the business's success, without any actual equity position.

There are downsides to profit-sharing plans. If your business experiences large shifts in profitability from year to year, a profit sharing plan might not be a good fit, since workers might not feel particularly rewarded during "down" years--like during the recent economic downturn--for the business when profits have obviously fallen. Also, profit-sharing plans can place too much emphasis on profitability, which can become a problem in times when the business needs to invest its profits in expansion or weathering difficult markets.

Due to the legal requirements imposed on profit-sharing plans, administering such a plan can also be complicated and time consuming. "Most businesses that offer a profit sharing plan seek an outside financial advisor to run the plan and maintain legal compliance," notes Sheridan. This can become expensive, especially for small businesses. (For much more on how profit sharing plans operate and the legal regulations that govern them, check out the Department of Labor's profit sharing plan web page here: http://www.dol.gov/ebsa/publications/profitsharing.html)

Writing it down
"Before you announce any bonus or profit-sharing plan to your employees, make certain you have worked out all the rules in advance, and that you are prepared to put those rules in writing," says Sheridan. The rules should spell out clearly exactly who is eligible for the bonuses and profit sharing, what must be done to receive it, how such compensation will be dispensed, and under what circumstances employees might forfeit their right to receive the benefits. "We live in a time when employees are quick to sue over any perceived slight," warns Sheridan. "Even long time, trusted employees can quickly become disgruntled and angry is they think they aren't receiving money they assumed they were entitled to." The only way to protect your business from hurt feelings and--worse--litigation, is to make certain that every aspect of the plan is in plain writing for everyone to see.
SBC Team

Motivating Employees, Part II

Posted by SBC Team May 14, 2010
Encouraging healthy competition among employees.

By Christopher Freeburn

Competition is the bedrock of our economy. Companies compete with each other for customers, new ideas and opportunities. Within companies, competition exists as well, as employees compete with each other to make their way up the management ladder, or for bonuses or other perks. This competition can induce employees to be more productive, inventive and focused on improving the company. It can boost the bottom line and lead to innovation. Competition, we know, has its benefits.

Of course, it also has its downsides. Too much competition within a given workplace can lead to escalating tension among employees. This, in turn, can negatively affect the business's overall functioning. A business workforce riven by antagonistic competition may quickly discover that its employees are more concerned with their own advancement than the business's, which can result in decreased efficiency, eroding productivity, poor customer service, and, somewhat ironically, an overall loss of competitiveness in the marketplace.

So how can you foster an environment of constructive competition among your employees that benefits your business without exacerbating workplace tensions?

Avoid public grading. Many companies think they can foster competition by creating public lists of the most productive employees. A car dealership, for instance, might create a chart of its salespeople ranked by the number of cars sold in a month from most to least, and then post that list where the entire office can see it. The idea behind such a list is to spur the salespeople to sell more cars, but for those ranking at the bottom of the list, it tends to inspire fear of possible job loss, bitter envy of those surpassing them, and resentment toward the business in general. The sense of insecurity fostered by such a list can drive the lower ranked salespeople to cut corners and violate rules in a desperate effort to increase their sales. This can lead to significant trouble for the company later on.

Create a win-win environment. Nothing can divide a workforce as quickly as a winner-takes-all approach to bonuses and incentives. In their book The Enthusiastic Employee, David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer note how such single-employee bonuses produce a negative effect. "We argue that individual reward schemes ... that will result in many employees having no sense of reward diminishes teamwork," the authors write.

If you choose to distribute rewards only to the top performer or single highest producer, you risk generating resentment and jealousy among other employees. Worse, average-performing employees, believing that they can never surpass the output of the "top" employee, may believe such rewards are permanently out of reach for them. In that case, not only with such incentives fail to motivate them to increase productivity, but they can actually depress their productivity and resourcefulness. This can be avoided by structuring incentives so that all employees who show an improvement in the specified goal or task receive some form of compensation. The incentive can be scaled so that those who achieve larger gains receive greater rewards, but by making sure that all of your employees have at least the chance of receiving the benefit, resentment will be mitigate and participation will be improved.

This type of competition-based reward strategy has two positive effects, Sirota, Mischkind and Meltzer write. "It boosts performance in an of itself; and it satisfies workers' camaraderie needs, which adds to their enhanced performance."

Promote teamwork. While individual performance should always be appreciated, a single worker cannot complete all the many projects and problems that a business must overcome. It is vital that a small business's workforce know how to cooperate to achieve common goals. Successful group efforts should always be rewarded. This can take the form of perks or profits shared among all members of a team working on a project, or to a small party of after-hours social event in celebration of the successful completion (or progress toward the successful completion of) a project or goal. Such events distribute positive feelings among the group, allowing all to share in the feeling of accomplishment.

Also consider allowing employees to generate suggestions for improving team performance. Likewise, rewarding those ultimately successful suggestions helps improve a feeling of cohesion among workers and a sense that they all have a stake in the business's long-term success.
SBC Team

Motivating Employees, Part I

Posted by SBC Team May 10, 2010
What kinds of incentives should your small business consider?

By Christopher Freeburn

Enthusiastic, well-motivated employees are the backbone of your small business's success. Fostering an environment in which employees feel both rewarded for their performance and part of a team can greatly increase your company's productivity and competitiveness in the marketplace. Your customers will certainly notice the difference between happy, well-motivated employees and dissatisfied, disinterested employees who provide only lackluster or incompetent service.

Incentives like bonuses and perks for increased productivity or the attainment of particular goals, if wisely implemented, can boost your employees' output while increasing the attention they pay toward the details of day-to-day business operations like customer service.

The range of incentive with which to reward your employees is considerable, which raises the obvious question of which ones will work best for you.

What can you offer?
The first step in deciding how to structure incentives is to determine what incentives your business can offer. Incentives run the gamut from financial bonuses, extra vacation days, office parties, perks like parking spaces close to the office, or extended lunch hours. Basically anything that improves an employee's day can be offered as an incentive, so long as your business can afford it. Some businesses don't have the income for cash bonuses or extra vacation days; in these cases, you need to be a little creative: Try offering a discount on the company's products, or letting employees leave early on Fridays. "Money isn't the only incentive workers appreciate," says management consultant C. Davis Fogg. "People have psychological as well as financial needs. More personal time to be with their families, or even just some visible sign that your company recognizes their efforts--a plaque or public pat on the back--can go a long way." Items that help build an employee's sense of loyalty and co-identification with your business are also helpful--i.e. shirts, jackets, or hats bearing your company logo.

Group vs. individual rewards
Many businesses assume that offering a single reward or bonus to the best performing individual employee will create competition among all employees, raising the business's productivity as a whole. But this is not always the case. In fact, rewarding a single employee can result in hurt feelings and resentment among the other workers, particularly if that one employee is consistently receiving such awards. Consider spreading out awards on team basis. Bonuses can be staggered so that the best performing people get more, but keep some level of incentive open to everyone. That ensures that employees who do not believe they are likely to get the top reward still have an incentive to improve their performance, knowing that there will be some level of incentive for doing so. (For more on competition within the workplace, see Part II of this series.)

Set appropriate goals
Using incentives to boost productivity works best when the specified goals are reasonable. If you set the goals too high, you risk discouraging your employees if they are not attained, or making them feel that you are asking too much for too little reward. There may be times when a particular project demands unusual levels of hard work and commitment on a tight deadline. In those cases, be sure to reward your employees accordingly.

 

"For incentives to be effective, they have to be commensurate with the effort involved in earning them," Fogg advises. Setting the bar high for occasional special projects is understandable, but for more mundane productivity targets, make sure you set goals that can be reasonably achieved. Setting reasonable goals will also help keep all members of your team on board. If the goals are too hard to achieve, some employees will not even bother trying, or stop trying too early. In that case, your incentive program may have failed before it started.

Make it clear
In order for an incentive program to work, your employees need to know exactly what you are offering them and what they need to do to earn it. Put the incentives program in writing, clearly explaining all of the terms and conditions of your offer. "Talk it over with your employees to make sure they understand exactly what you want," says Fogg. "The more communication, the better. Be sure everyone understand how it works."

Once you have made your employees aware of the terms of your incentive program, stick with them. Your adherence to the rules must be consistent. If you grant one employee a bonus or share of profits that are not clearly earned under your written guidelines, other employees will expect you to offer them similar leniency. Putting the plan in writing and applying it consistently prevents misunderstandings that might lead to resentment and recriminations-and even possibly litigation-from your employees.

Keep track of results
Your business is unique. So are your employees. An incentive program that works for your competitor across town may not work for you. Try different incentive options and keep close attention to how each affects your results. Solicit feedback from your employees to see what options they prefer.

by Max Berry

The internship has become a rite of passage for America's young workers, and with good reason. Internships are chances for students and recent graduates to put their potential to practice and discover what kind of work fulfills them, or, just as importantly, what kind doesn't. But hiring an intern can do plenty for a small business owner also--if you're prepared for the commitment.

Finding The Right One For You
Before you hire an intern, make sure you have the time to manage one. If you don't, appoint a trusted member of your staff who can; someone who knows your business and the industry well and is eager to share that knowledge. Make a plan with the senior members of your staff to determine where an intern's services are most needed, which tasks should be a part of his or her daily routine, and to whom on your staff the intern will report.

 

Sites like http://internships.com/ and http://www.experience.com/ allow you to advertise available internships, but one of the most effective ways to find an intern is to contact local colleges and universities. Many schools' career centers run internship programs, whereby students can intern with companies in their chosen fields for college credit. Even if you don't participate in a formal program, you may want to send information about your internship to relevant professors and faculty and ask that they pass it along to students.

When choosing an intern, go through all the steps you would when hiring a full time employee. Ask for professional resumes and conduct interviews. This will give your prospective interns some insight into the hiring process and help you discover who among the bunch is most prepared to work in a professional environment. Even more than when hiring an employee, weigh the benefits that working for your company would have for each candidate. Remember, you are grooming a future employee-- someone else's or possibly even yours.

Mutual Benefits
Some benefits of employing an intern are obvious: they can provide valuable administrative assistance around the office, performing for very low--or even no--wages duties a temp or full time administrative assistant would be paid for. Moving an intern from project to project throughout your firm frees up your employees to prioritize their own work and focus on the most important tasks first. And it is almost an axiom at this point that new graduates have a firmer grasp on new trends and technologies than their more senior workplace counterparts.

But perhaps the most beneficial characteristic of an intern--a good intern anyway--is one of attitude. Interns bring a new perspective and youthful energy to the workplace. For an intern, everything is new; the simple act of coming to the office is exciting. This kind of energy can be infectious to your longtime employees.

 

And you can do just as much for your intern. A college campus--full of pursuits more academic than practical--isn't necessarily the ideal place to discover one's calling, but an internship may be just that. Students and recent graduates still uncertain of their next move can benefit enormously from a well-conceived internship program.

 

Don't forget that internships, ideally, are ways for prospective employees and employers to feel each other out. Today's intern could become tomorrow's employee, but the street that leads there runs two ways. Commit to the idea that the seasoned business owner can learn from, as well as teach, the young upstart. The business relationship that results could be of equal value to you both.

Managing Your Intern
If you don't pay your interns-and many managers don't-make sure you aren't risking legal trouble by using them as uncompensated employees. Law dictates that interns cannot take the place of a regular salaried employee. This means interns can't be used as fill-ins for employees away on maternity leave or furlough. Rather, interns must receive active training of the type that they would pay for at a professional or vocational school.

Many interns work for college credit or simply for the real-world experience an unpaid internship provides. That experience may prove incentive enough to take an internship, since students receiving college credit would have to pay their college for those hours anyway. Nevertheless, the issue of unpaid internships and potential employer abuses of the free labor they provide has gained much more scrutiny lately, so it's important that any unpaid internship your company offers complies with the six federal legal criteria established by the Labor Department. (For more on these criteria, go here: http://wdr.doleta.gov/directives/attach/TEGL/TEGL12-09acc.pdf.) You may want to offer interns the option of working for college credit at the outset--a matter they can take up with the school--and, if they perform well and want to continue on after the term ends, consider offering them a small hourly rate for their work.

Interns are there to learn, and the best way to learn a task is to actually do it. An internship should entail one special project to be completed by the intern over the course of their time with your firm. Set regular times for them to check in with you about their progress, but let your interns learn firsthand what it is to see a project through from conception to completion under real-world circumstances.

If you notice a problem in an intern's performance, mention it immediately. More than anything, mistakes are opportunities for learning. Make sure your interns feel comfortable coming to you and asking questions, but always ask for as much feedback as you give. Seeing yourself and your company from a fresh perspective can only be a good thing. After all, you can learn just as much from an intern as your intern can from you.
SBC Team

Back in the Black

Posted by SBC Team May 5, 2010
Tips to Reinvigorate Your Business

By Christopher Freeburn

Getting customers to spend money is the most important task of any small business owner. This is true regardless of whether the overall economy is booming or not. Here are a number of tips to boost your business's revenues.

Offer Outstanding Customer Service. "Ninety-five percent of all business owners believe that their companies are exceeding customer expectations in terms of service," says John Tschohl, president of the Service Quality Institute. Unfortunately, he adds, that is far from the truth. Indeed, lousy service and poor communication ranks as one of the top consumer complaints and dissatisfied consumers generally do not make repeat customers. Worse, they tend to complain to their friends and neighbors about their bad or lackluster experiences. In fact, some consumer research has found that dissatisfied customers tell anywhere from three to five times as many friends and family about a bad business experience than they do a good one. And now with the advent of online ratings and social media sites like Facebook, Yelp and Twitter, respectively, one frustrated customer can magnify their voice even further and possibly deal your business's reputation a crippling blow. In a competitive economy, you don't need that kind of corrosive brand "badvertising." In fact, Tschohl calls good customer service "a matter of survival" these days.

Make customer service a focus from the top down. Don't just rely on your sales people or customer representatives. Senior managers and company owners must be just as focused. Lead by example. Hire carefully. Not everyone is temperamentally suited for dealing with customers. Make sure the people you hire are capable of dealing with upset customers without losing their cool. Remove any employees who are inattentive to customer needs. Train your employees. Make sure your employees know your customer service goals and have been fully trained in how to handle dissatisfied customers. All company policies for dealing with customer issues should be clearly stated and understood by employees. Your employees must understand how important customer service is to the company's success. Know your customers. Talk directly with your customers about their experience dealing with your firm. Find out who they are and what you can do to improve their experience with your company. Provide methods for them to leave feedback.

Make it easy to pay. Today's consumers expect a wide array of payment options when they shop. Traditional means of payment-cash and checks-have been dropping sharply in popularity among consumers in recent years as many switch to credit and debit cards. This is particularly true among younger consumers who vastly prefer plastic to cash when making purchases. "Convenience is very important to consumers today-the less convenient you make it to do business with you, the more likely that they will look to the competition," says Tschohl. Studies have also found that people tend to spend more when using credit and debit cards than they do when using cash. Obtaining a merchant account to accept credit and debit cards is relatively easy for even the smallest businesses these days. Most financial institutions are eager to get their plastic accepted in as many places as possible. Numerous credit/debit card and electronic payment processing providers exist and the competition for your business is fierce. (For a more detailed discussion of this topic, view our two-part series "Getting Paid.")

Reward customers. People like to feel that they are getting "something extra." You can provide customers with this feeling in a variety of different ways. Offer small gifts to frequent customers who make a certain amount of purchases. Build in tiers of rewards where returning customers can qualify for ever-greater discounts or free samples of your higher-end products. In fact, setting up an aspirational or upwardly mobile rewards program your business can end up benefiting in multiple ways: it spurs repeat purchases, fosters brand loyalty, and introduces customers to a wider range of your product offerings.

Increase your Internet presence. If your business doesn't have a website already, you need one now. Many consumers prepare to purchase a product or service by researching prices and companies online. If your company doesn't have a website, you've already lost out on a number of potential customers right there. Websites also allow your business to extend its geographical reach and alert potential customers outside the typical area in which you operate of your business's existence, possibly bringing in new orders. Adding e-commerce capabilities to your existing website (the ability of customers to make purchases or place orders online) will also build sales by attracting customers who prefer online transactions. Website creation is not as hard as you imagine. Most web hosting firms-the companies that maintain your business's website on their servers-will walk you through the process of creating a website and adding e-commerce features.

Reward employees. Highly motivated employees are crucial for your business, especially if your customers deal directly with them. If your employees display enthusiasm, company loyalty, product knowledge, and go out of their way to be helpful, that experience will leave a significant and positive impression on customers, making repeat business much more likely. Conversely, if your employees show only lackluster product knowledge, appear distracted or disinterested, and are less than helpful to customers, the negative impression they have conveyed to your customers may cause you to lose not only repeat business, but any additional business those customers' recommendations might have brought in. You can keep your employees happy and enthusiastic by making sure they are well compensated for their efforts. This can mean higher salaries, benefits, bonuses, or perks (like vacations or discounts on company products), but it can also mean simple behaviors like listening to your employees, taking their opinions seriously, asking for suggestions, and keeping them informed about what's going on at your company. If they feel valued as employees, they will likely value the company as well.

Keep informed. As a small business owner you need to be constantly on your toes. Larger businesses, with their greater financial reserves, have the luxury of being able to recover if they are caught off guard by changing market conditions. You probably don't. You need to know what's going on in your marketplace and among your company's potential customers. Is the economy really recovering or not? How does that affect your customer base? Are interest rates going back up or staying low? Are there new competitors appearing in your area? How are businesses similar to yours faring? Join your local chamber of commerce or local industry groups and attend their functions. Read the local newspapers and industry publications.
SBC Team

Time to Leave the Nest?

Posted by SBC Team May 3, 2010
For today's home-based entrepreneurs, the decision to move their business out of their home isn't so simple anymore.

By Reed Richardson

 


After nearly 10 years of running her embroidery design business out of her Austin, Texas home, Jenny Hart recently took the plunge and moved her business out of her house. "It was scary and, at times, I was still a little unsure about it, but I was definitely at the ‘I am done!' stage," Hart says of the move, laughing.

Initially founded at her kitchen table as a more of a hobby than a business, Hart's online and mail-order company, Sublime Stitching, had long since blossomed into a successful, full-time venture, one that required two part-time employees to handle all her sales orders. But as her business grew over the years, so too did its reach into her house, and by last summer its footprint had taken over a good chunk of her home's physical space. And with her job always within easy reach, she says she often succumbed to the temptation to just keeping working: sometimes seven days a week, sometimes as late as 11 p.m. every night. "Literally, it had become hard to put walls between my work life and my personal life," she explains. "I really wanted my house back."

Not your parents' home-based business anymore
Of course, using one's house as the launching pad for a small business has long been a favorite money-saving tactic among part-time business owners and entrepreneurs looking to survive the often-difficult early stages of a start-up company's life cycle. But recently, a larger demographic shift has begun to occur within the ranks of home-based businesses, one that is upending the conventional wisdom among entrepreneurs about when, or even if, they should let their businesses leave the nest.

"The common perception is that home-based businesses are merely hobbies or side businesses contributing little to the business owner's income or the overall economy," a recent Small Business Success Index (SBSI) survey of home-based entrepreneurs noted. But this narrow viewpoint no longer reflects reality, the survey's results found. Thanks to vast technological advances in productivity and connectivity as well as a growing societal acceptance of working out of one's house, the study found that home-based businesses aren't just for moonlighting and start-ups anymore. Instead, the data showed that today's home-based business landscape includes an increasingly diverse, well-established, and financially successful array of companies.

In fact, according to the SBSI data, full-time home-based businesses--defined as those companies that provide their owners with more than half of their income--now employ more than 13 million people nationwide and make up one-third of all small businesses in the country. And among these home-based companies, almost half have been in business more than 15 years, with only one in five having existed less than five years. What's more, the survey reported that the median household income for these full-time home-based entrepreneurs ($75,000) was roughly 50% higher than for U.S. households in general ($50,233). "Homepreneurs are operating significant businesses that are as successful as non-home based businesses," the SBSI survey concluded. And because of statistics like these, the survey also predicted the number of homepreneurs is likely to surge over the next few years.

No office = No credibility? No way.
These changes don't surprise Steve King, founder and president of Emergent Research, a small, California-based consulting company that specializes in studying home-based entrepreneurs. "It's definitely different now," he says. "It used to be that home-based business owners would move out the minute they could afford it because they didn't feel like they were successful or credible unless they had a ‘real' office," Kings says. "That's just not the case anymore. Now, more and more of them are only willing to do it if they are projecting a revenue boost or return on investment from the move."

As anecdotal evidence of this new attitude among home-based businesses, King points to his own company, which has been based in his home for 18 years and where he, his wife Carolyn, and son Thomas all work. "We have several large corporate clients now and they don't think anything of it that we're based out of our house," he says. "When we were starting out, however, I don't think we could have all done this from our house. But now I think our society has reached a tipping point where home-based businesses have much more credibility and, consequently, many of them are staying put longer and some, like mine, may never make the jump out of the house at all."

More eggs might mean a bigger nest
Still, many home-based small business owners may have ambitions that would necessitate moving their companies out of the house someday. But are there any telltale signs that they should be on the lookout for? "More often than not," King explains, "once your business reaches the hire-an-employee stage, you need to at least think about moving." Bringing outsiders into your home regularly to work, he points out, can create lots of extra responsibilities and complications. Suddenly, everything from employee parking availability to local zoning laws to workspace safety regulations can become pressing legal and logistical issues, all of which can prove to be big distractions for a small business owner looking to expand.

What's more, whether your home-based business is contemplating adding staff or rolling out new products or ramping up production capacity, you can't overlook the all-too-critical issue of space. After all, many full-time, home-based businesses have a propensity to creep into every unused corner of a house almost from the outset. So, if your home-based business has had years to put down roots throughout your home, carving out additional square footage so that you (and the rest of your family) won't be constantly tripping over new employees, additional inventory, or added machinery can become a distinctly difficult challenge. To prevent those future crises, a pre-emptive move might be in order.

"My breaking point was when I just had boxes on top of boxes," recalls Hart. With two part-time employees working 20 to 30 hours a week organizing products and fulfilling shipping orders, Hart says she realized last summer that her business's size had surpassed her house's capacity to contain it. "I took a long look at the direction of my company and decided it was time," she explains. "I just couldn't store things efficiently anymore and the lack of space made even doing inventory difficult. It was very frustrating."

Emotions such as frustration, loneliness, dissatisfaction, or even old-fashioned anger may not seem like legitimate reasons for moving a business out of one's house, but homepreneurs ignore these early warning signs of trouble at their peril. After a few years of toiling away--often in isolation--at a home-based company, even successful business owners can end up feeling like they are trapped on a desert island or stuck in a deep rut. This is particularly true for entrepreneurs who, before they launched their own companies, derived most of their social life from their work life. And if the original drive and passion for one's business slowly turns to isolation or apathy, a home-based business owner might be better served by a change of venue.

Striking the right balance - hybrid models, co-working
Make no mistake, a full-on move out of one's home can be a very costly enterprise when things like rent, computer workstations, office furniture, security, insurance, and even commuting costs are added to a small company's financial top lines. What's more, even successful home-based business looking to expand may not require a whole storefront or an entire office suite. For those companies, an increasingly popular alternative involves the practice of renting temporary or part-time access to professional office space office, or co-working, as it's also known. Once a rarity, part-time or drop-in office leasing--sometimes called "virtual offices" or "hot desking"--has grown increasingly popular in the past decade, with thousands of locations now available.

"If you just need an outside desk, workspace, or, occasionally, a conference room, co-working facilities have real appeal," counsels King. "They're kind of an in-between step for home-based business owners who aren't ready to fully commit to a move. Plus, these facilities often provide enough community and networking with other small business owners that those emotional reasons for moving a business out of the home eventually fade away."

For her part, Sublime Stitching's Hart ended up adopting a kind of hybrid home-based business model as well. She relocated all of her business operations as well as her company's shipping and order fulfillment center to a very small single-story building near her house that she rents full-time, but she still maintains her embroidery design studio inside her home's garage. "Now, I usually work at the office in the morning and go home to work in my studio in the afternoon," she explains, before gushing, "I just can't emphasize enough how much I like not having my office in my house anymore."

As for all that frustration that prompted her business move in the first place? Hart says those feelings have now been replaced with a healthy regard for separating her career and her personal life along with renewed confidence about her business's future. For home-based business owners pondering whether or not to move out, those sentiments can be powerful reasons to consider. But remember that for many homepreneurs, staying put, rather than moving, may be the best way to achieve them.

 

To check out the Small Business Success Index survey of Homepreneurs online, go here:
http://growsmartbusiness.com/wp-content/files/Homepreneurs_A_Vital_Economic_Force.pdf

To read more about Jenny Hart's experience moving her business, Sublime Stitching, go here: http://sublimestitching.com/newoffice.html

To learn more about co-working and to find other shared workspaces check out the Co-working wiki page here: http://coworking.pbworks.com/Coworker or search temporary-real estate companies like http://www.regus.com/

For a checklist of office space considerations to help your business in its search for a new home, go to: http://www.businesstown.com/hoco/home-commercial.asp

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