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2011

Gen Y Entrepreneurs.pngMark Zuckerberg. Dennis Crowley.  Andrew Mason.  These are just a few growing entrepreneurs, born between 1977 and 2000. In fact, the SBA and Junior Achievement Worldwide report that 69 percent of teenagers and two-thirds of college students say they want to start their own businesses. 

 

So, what types of businesses are they starting?  While many are starting businesses connected to social media or the web in some way (as Zuckerberg, Crowley and Mason did), there are some surprises.  Some young entrepreneurs are reinventing old industries, like supply chains, credit unions and packaging.  Some are creating businesses that cater to other Gen Y’ers. Others are joining family businesses, but turning them on their heads by hiring their parents and extended relatives as consultants and junior employees.

 

Why are Gen Y’ers so passionate about starting their own businesses?  Research shows they may be more willing to take business risks than their Gen X and Baby Boomer predecessors.  According to one study, 67 percent of Gen Y respondents were willing to take financial risks, even during the recession.  They may be undeterred by competition, as they embrace a mindset where every other company is considered a potential collaborator.  On the other hand, many members of Gen Y are starting their own business ventures out of necessity.  In 2010, fewer than 25 percent of college graduates were able to get a job upon graduation.

 

Work life balance.pngOne thing seems to be constant:  Gen Y entrepreneurs tend to play by their own rules.  While they may share a desire for financial independence with their older counterparts, they could be motivated by other factors as well.  They may be convinced that they can improve an existing industry or company with the technological innovations and brand ingenuity for which their generation is known.  Or this social justice-minded generation might want to conceive of businesses that have initiatives for social good built into their business models. A study by Cone, Inc. and Amp Insights shows that 61 percent of 13- to 25-year-olds feel responsible for making a difference in the world, and 79 percent of them want to work for a company that feels the same way.

 

Or, maybe Gen Y just wants to have fun at work.  Studies have shown that these entrepreneurs value and protect work/life balance more than any other group. In fact, 59 percent of respondents to a survey of 37,000 college graduates said that balancing their personal and professional lives was at the top of their list of career goals. 

 

This generosity doesn’t only apply to their schedules.  They are almost shockingly flexible with their employees.  They have embraced telecommuting, job sharing, part-time employment, virtual offices and creative morale-boosting efforts to a degree that puts most of the companies on the “best places to work” lists to shame.

Whether you’re a member of Generation Y yourself, a more seasoned entrepreneur looking for a younger business partner, or a consumer, this is a generation to watch. Have you learned any lessons from a member of Gen Y? Or, are you a Gen Y entrepreneur? Share your thoughts with the SBOC community below.

Steve Strauss

Using Apps for Business

Posted by Steve Strauss Sep 27, 2011

Steve-Strauss--in-article-Medium.pngEvery year for my USA TODAY column, I do an annual Top 10 Trends in Small Business column. This past year, it seemed that Facebook was a shoo-in for the No. 1 spot. After all, The Social Network was one of the top movies of the year, Facebook topped the 500 million user mark and the site was valued at more than $50 billion. Facebook seemed like the obvious winner.

 

Except it wasn’t. It came in at No. 2 for 2011, actually. What could have topped Facebook as a trend that is changing small business more than any other?

 

Apps.

 

Indeed, the only thing hotter and more buzz-worthy than Facebook is the popularity and ubiquity of smartphone apps. People are using apps every day, all day long – not only to have some fun and kill some time (death to pigs by Angry Birds I tell you, death!) – but also to effectively run their businesses.

 

The smart small business owner can capitalize on this trend in two different ways. First, you can, and should, find and use those apps that make running your business simpler and more profitable. Second, you should strongly consider creating and offering your own app to your customers.

 

Let’s take a look at both of those options:

 

The reason it is smart to have the foresight to integrate business and efficiency apps into your work day is because it’s where social media is headed. You are on your smartphone far more than you ever used to be, right? Well, the same is true for your staff, vendors and customers. Mobile devices and smartphones are where the eyeballs are and, as such, it is where you need to be too. It is how people are gathering information these days.

 

Of course, I can’t tell you which specific apps would work best in your business. There simply are too many available, doing many different things for businesses that it is impossible to say which ones you need and would like. However, you can figure out fairly quickly which ones you should check out by

  • Doing a Google search
  • Reading industry magazines, websites and blogs
  • Getting recommendations from writers and bloggers you like (personally, I enjoy and use recommendations from SmallBizTrends, CNET and SmallBizTechnology)

 

The important thing is to find apps that fit your business needs and try them out. Undoubtedly you will find some amazing tools out there that will help you run your business more easily, efficiently and effectively.

 

The second way to take advantage of this trend is by developing an app of your own. Essentially, there are two approaches you can take:  pay a developer to create a custom application, or create a mobile version of your website.

 

The first method – creating a real app – looks like this:

 

1. Have a good idea:  Your app idea should be based on fulfilling an unmet need or desire that exists in the market.

 

2. Analyze the idea: Who is going to use it? Why would they want it? Will they pay for it?

 

3. Hire a developer/designer/programmer: Expect to pay roughly $10,000 and expect it to take at least a month for the app to be ready. To help get started on creating an app, check out Craigslist, Guru.com and Elance.

 

4. Submit your app to the app store(s): Since this is a fairly technical process, this is something your developer should help with.

 

5. Market your app:  Just as you must market your business, you must market your app. Look into creating a press release or announcing it on your website and other company collateral.

 

Finally, the last option, creating an app version of your website, is easy and cheap.

 

There are plenty of web-based services you can use to create a simple app that mimics your website, for instance SwebApps. With this type of service, you just point, click, drag and create an app. It’s easy.

 

Your app could include the following:

 

  • Content, blogs, podcasts, etc.
  • Products from your store — allowing anyone to make purchases  through the app
  • Maps and contact info
  • YouTube, Facebook and Twitter buttons

 

Whether you outsource your app development, or create one in-house, offering a mobile application is just one more way to stay in front of your customers.

 

But whichever approach you choose, it’s probably time to hop on the app bus, Gus.

 

 


 

About Steve Strauss

Steve Strauss is one of the world’s leading small business experts. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. Steve is also the author of the Small Business Bible and his latest book is Get Your Business Funded: Creative Methods for Getting the Money You Need. A popular media guest, Steve is a regular contributor to ABC News Now and frequently appears on television and radio. His business, The Strauss Group, creates unique, actionable, entertaining, and informative multi-media small business content.

 

You can read more articles from Steve Strauss by clicking here.

Stress quote.pngAs an entrepreneur, stress can come from many sources. The following scenarios may sound familiar: you started your business on a shoestring, not knowing if you would survive the first year; you faced unexpected competition from a shop opening on the same street; you became frustrated when your marketing campaign did not bring in the flood of customers you expected; you were disappointed when you did not achieved the work/life balance you initially envisioned when you started out.

 

While you may have heard plenty of advice about getting extra rest, exercising and maintaining a positive outlook, you may want to try some more aggressive strategies to keep stress from derailing your business. 

The following are some additional stress-busting suggestions:

 

  • Face your fear. Find a way to turn a challenge into an opportunity or to stay the course while the challenge runs its course.
  • Assume the worst.  Reality will almost always turn out to be less of a big deal than what you first imagined.
  • Nurture relationships. Send an email, call or meet in person with friends and/or family members on a regular basis.
  • Go off the beaten path. Practice difficult conversations you know you have to have while hiking in the woods.
  • Relax more. Synchronize your heart and mind through meditation techniques such as “heart coherence.” Or, inhale aromatherapy scents like lavender and marjoram to promote relaxation.
  • Venture outside the box. If you are feeling a little adventurous, take an uncharacteristic risk.  Consider bungee jumping, white water rafting or singing karaoke. While doing so, completely remove yourself from your business by turning off your smartphone and truly enjoying the moment.

 

Even in the best of times, stress may not go away on its own.  Take comfort in the fact that there are many proactive steps you can take to manage it better.  You likely don’t want to become one of the 75 percent of people surveyed by the APA who experience severe headaches and upset stomachs from stress. How do you cope with stress? Share your thoughts with the SBOC community below.

Steve-Strauss--in-article-Medium.pngOnce upon a time, I was very anti-Twitter. This stance was, shall we say, a bit unpopular, especially considering Twitter was exploding around that time, circa 2009. But take it I did.

 

I wrote a column for USA TODAY in which I stated that for most small businesses, Twitter might just be a waste of time. To say I was lambasted gives lambasting a bad name. I was called just about every bad name in the book, especially, of course, by the Twitteratti. Looking back, I see now that I was clearly wrong about several points I made in the column. That said, I was right about a few; most notably I think that using Twitter to grow your business requires time and consistent effort. Unless you are prepared for that investment, your marketing time may be better spent elsewhere. I still think that is the right approach.

 

But where I missed the boat, and where I was appropriately called out the most, was in understanding just how powerful a marketing tool Twitter can be for most small businesses. It turns out that Twitter is often a great way to

  • Get your message out
  • Make more contacts
  • Become an influencer
  • Build your business, and, yes even
  • Make more money

 

Click here to read Steve's article "5 Little-Known Ways to Use LinkedIn to Grow Your Business".

 

My follow-up story about the woman who contacted me saying that, via Twitter, she had grown her PR business by 36 percent marked the turning point for when I started to come around. Clearly there was more to Twitter than my simple take: “people don’t care what you had for lunch.”

 

Personally, since writing that column two years ago – and then seeing the light – I went from a few Twitter followers to now, where I am getting closer to having 10,000. There are many reasons to want more Twitter followers of course: so you can meet more people and have more conversations, so you can have a farther reach and, let’s face it, so you can establish your online brand and credibility; after all, the more followers you have, the stronger online presence you have, right?

 

All of this then begs the question: How do you get more Twitter followers?

 

The standard answer, the one you have likely read before, is that the secret is to be a great tweeter; that by tweeting valuable content that people like, potential followers will organically find and follow you. And yes, that is true; it is the core of any strategy (including my own), but it is equally true that it only gets you so far. The quality of your tweets is only one factor.

 

It turns out that there is a lot more to it, and it’s not rocket science.

 

Using the techniques below, I have quadrupled my following in a little more than a year. In the last 24 hours I gained more than 100 new followers. You can do it too.

 

Here’s how:

 

1. Follow more people: The quickest and easiest way to immediately get more Twitter followers is just to begin following more people. There is an unwritten twittiquette that it is proper to follow people who follow you. Ergo, if you follow more people, you will get more followers. Simple.

 

That said, a corollary to this rule is that not everyone you follow will indeed follow you back, so then what? Try this nifty trick:

 

2. Follow people in your field who have a high likelihood of following you back: Maybe a personal example best illustrates my point: I write about small business, so one thing I consistently do is find the best, most followed small business tweeters I can and cull their “followers” list. I figure that if someone follows one of these folks, there is a high chance that they would like to follow me as well.

 

I also regularly check out the list of people who follow my tweeting colleagues. From the follower’s profile, I can quickly surmise whether they might be interested in what I tweet, and then I follow them. When they do follow back, I can rest assured that they are a quality follow and not just a number; that they are someone with whom I can and will want to forge a deeper connection.

 

Note: I strongly suggest that you do not simply and blindly follow all followers, as this will not only create a bad list for you, but will also likely lead to a Twitter terms of service violation.

 

3. Use hashtags (#) to find the good followers: As you likely know, hashtags group tweets by conversation topic. Find people using hashtags appropriate to your business and follow those folks.  Additionally, it is good practice to add appropriate hashtags to your tweets so that they will show up in those Twitter streams and thereby increase your chances of getting retweeted and followed.

 

4. Get Retweeted: Having your followers retweet your content is the best word-of-mouth advertising available today. It is like getting an unsolicited endorsement. How do you get retweeted? Tweet great stuff of course, and then…

 

5. Ask: It never hurts to ask, right? For instance: Please follow me at @SteveStrauss.

 

 


 

About Steve Strauss

Steve Strauss is one of the world’s leading small business experts. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. Steve is also the author of the Small Business Bible and his latest book is Get Your Business Funded: Creative Methods for Getting the Money You Need. A popular media guest, Steve is a regular contributor to ABC News Now and frequently appears on television and radio. His business, The Strauss Group, creates unique, actionable, entertaining, and informative multi-media small business content.

 

You can read more articles from Steve Strauss by clicking here.

time management.pngMany small businesses may not be devoting enough time or energy to develop a true organizational system. Often, getting organized is an afterthought, or something only addressed out of necessity after reaching a certain point of disorganized chaos.

 

A 2010 survey from the National Association of Professional Organizers (NAPO) and Office Depot shows that, although 82 percent of respondents thought a more organized workspace would improve productivity, 42 percent said they only cleaned up clutter once a month. 

 

The consequences of chronic disorganization can range from lost time (something no small business owner has enough of) to missed deadlines or tardiness to key meetings.   Conversely, the benefits of organization have the potential to make a positive impact: Having a handle on your physical space, documents, schedule and staff utilization can free your time so you can spend more time for with customers or or to develop plans  to break into a new market. 

 

To help get your company organized, consider the following tips:

 

Physical Space

  • Streamline your desk area so that only the items you use regularly are at hand.  A cluttered desk may make you look busier, but constantly searching for documents can erode your productivity.
  • Clean off your desk at the end of each day.  It will make it easier to get to substantive tasks the next morning.
  • Envision an office space that will keep you energized and work on moving toward that goal in incremental steps.  If you want it done all at once, consider hiring a professional workspace planner.

 

Paperwork

  • Keep all official business documents (incorporation certificates; insurance policies; emergency plans) in one place and indexed for easy access.
  • If you are working toward a paperless office, avoid creating digital clutter by paying extra attention to file organization.  Be organized when you first set up your network and shared files so that anyone can find the most current version of a document on your network. 
  • Use the “one-touch rule” for reading e-mails and mail, i.e. either act on it, file it, or discard it.  If you’re not sure what to do, file the document according to the business goal it facilitates.

 

multitasking.pngTime

  • Keep a master calendar for business and personal commitments, particularly if you have a small business that requires your attention during the day and evening hours. There are a number of free online tools that can help you manage your time, including Google Calendar and Yahoo! Calendar.
  • Minimize information overload by cancelling subscriptions to magazines and online newsletters that do not have a direct, positive impact on your business.  You may feel instantly lighter.
  • When possible, tackle one task at a time.  While it may seem like you’re accomplishing multiple tasks at once, “multitasking” has actually been shown to hinder productivity.  A recent Stanford University study shows that while media multitasking in particular has become widespread, processing multiple streams of information and switching tasks frequently can overload your brain and jeopardize your productivity on all fronts.

 

Leadership

  • Delegate tasks and set deadlines in writing, not verbally. 
  • Motivate employees to be more organized through your own example, but remember that people’s work styles vary.

 

You may also find that taking a few simple steps toward creating a more organized work life may help eliminate stress and other mental clutter that can stand in the way of your employee’s and your job satisfaction. What are your biggest organizational challenges?  What tips and tools do you use? Please share your thoughts below with the SBOC community.

Steve-Strauss--in-article-Medium.pngI bet you have plenty of insurance. You insure your car, home, property, health, maybe even your life. So it always amazes me that, despite our best attempts to prepare for how unpredictable life can be, how few small businesses are actually ready for a disaster.

 

Sure, some of your insurance could cover some of a loss; but then again, it may not. Whether it is a hurricane like Irene or Katrina, a flood or something else, the truth is that many of these things are uninsurable (for example, try getting earthquake coverage in Southern California). But perhaps more importantly, insurance is only one small part of being prepared should a bad thing (and not even necessarily the worst thing) strike your business.

 

Disasters come in all shapes, sizes and forms:

  • Natural disasters, like hurricanes, tornados and earthquakes
  • Man-made disasters like riots and terrorism
  • Fire and flood
  • Theft and other loss

 

Bad things happen, that’s a fact. Example: In 2002, after Hurricane Andrew, I met Stan the accountant. Like many small businesses, Stan had kept all of his records on his computer at the office, including client tax returns, client lists, business records . . . everything. While he had backup copies, it too was on-site and so when the hurricane hit, being unable to get to his office at that moment, Stan lost not only his data and backup, but all of his physical files and other records too. He lost his entire business.

 

Click here to read more articles from small business expert Steve Strauss.

 

So it behooves the smart small businessperson to plan for the best, but prepare for the worst. As Stan told me at the time, “Please, tell your readers to just take some basic steps to ensure that their businesses can survive a disaster.”

 

With the height of hurricane season under way, it is important to take Stan’s advice and lesson to heart in order to avoid letting what happened to him happen to you.

Here are some basic and easy steps you can take that can make a huge difference:

 

Back up your data: Of course we all know that we should back up our computers regularly, and some of us even do it. But backing up sometimes is not good enough, and failing to back up remotely is business negligence.

 

So this is where cloud computing comes in. Many companies offer online backup services that are easy, affordable and reliable. The important thing is that you sign up for one and begin this process.

 

Have a backup power option: If the power goes out, you could lose you data, or, depending on your business, your business. So consider getting a backup generator, as well as some sort of backup battery system for your computers so that they can be shut down properly if needed.

 

Create an emergency supply kit: Store water, food, first-aid supplies, flashlights, whistles, duct tape, etc. in a safe spot.

 

Secure important documents: Critical documents should be copied and saved off-site, ideally in a fireproof safe.

 

Plan: Your disaster preparedness plan should include the following:

  • An evacuation plan
  • A phone or email tree to keep everyone in the loop
  • A way to keep things running if possible. Share with your team a contact list of your suppliers, clients and payroll system. Be sure to assign responsibilities for who will do what.

 

The federal government has a great website that can give you even more information, called Ready.gov. You should check that out as well.

 

 


 

About Steve Strauss

Steve Strauss is one of the world’s leading small business experts. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. Steve is also the author of the Small Business Bible and his latest book is Get Your Business Funded: Creative Methods for Getting the Money You Need. A popular media guest, Steve is a regular contributor to ABC News Now and frequently appears on television and radio. His business, The Strauss Group, creates unique, actionable, entertaining, and informative multi-media small business content.

 

You can read more articles from Steve Strauss by clicking here.

mentor.png

 

 

Whether you’re a start-up or you have been in business for a while, chances are issues will arise that you have not encountered before.  You may be looking to hire a strategic partner for the first time; you may be interested in launching a social networking campaign; or you may be seeking to expand your business by tapping into a new market.

 

Instead of taking extensive time to research these issues on your own (or opting to plow ahead and hope for the best), you might want to consider forming a relationship with a business mentor.  Sometimes the process of finding a mentor happens naturally, (i.e. someone you know socially turns out to be an expert on the business issue you’re facing).  Most of the time, however, it takes a concerted effort. 

 

The following are seven tips small business owners should remember when looking for a business mentor.

 

1. Narrow down the list of issues with which you need help.  Prioritize your most pressing challenges so you can get the most out of a mentor relationship. You may even determine you need more than one mentor.  Asking for too much information at once can overwhelm even the most generous person. 

 

2. Pinpoint the personal qualities you think you’d respond to in a mentor.    Before refining your list of potential mentors, do some soul searching and see if you can answer questions like these: 

  • Are you interested in someone who is a good listener and doesn’t offer feedback until he or she mulls over your question? 
  • Do you prefer people who tell you everything they know on a subject? 
  • Is responsiveness important to you - do you want hands-on guidance in real time? 
  • Would you prefer verbal feedback on your planned courses of action?

 

3. Define the parameters of the relationship.  The ideal mentor relationship for you might involve someone with whom you can speak briefly every time you have questions.   Or perhaps a monthly dinner meeting would be a more productive forum for addressing ongoing issues. Over time, you might discover that your mentor is interested in joining your company as a senior executive or even a CEO if you reach a certain point of growth.

 

4. Spread the word as far as you can. Reach out to your email list; contacts on LinkedIn and other social networks; friends and colleagues and attendees at networking events, conferences and trade shows. Don’t rule out total strangers. If you read an interview with a like-minded business owner in a trade or business magazine, feel free to send him or her a follow-up note.  As long as there is no direct issue of competition, most small business owners are happy to help a fellow entrepreneur, and might even see potential for collaborating in other ways in the future.

 

mentor quote.png5. Do not overlook larger resources.   The Small Business Administration, SCORE, local chambers of commerce and private mentoring businesses have wide-ranging mentoring programs that offer long-term mentoring and assistance with advisory board formation. These resources may prove to be a valuable way to connect with potential mentors.

 

6. Formalize the selection process. Similar to personal relationships, it’s probably best not to rush things.  Start out getting to know the potential mentor, get a sense of whether they’d be open to the idea and simply ask to pick their brain on a few issues. Discuss where and how often you will meet, what you can offer to the relationship, and long- and short-term goals.

 

7. Remember that mentoring is a two-way street.  Don’t forget to thank your mentor regularly for advice that led to good results for your business.  Further, periodic feedback is a good way to keep your mentor invested in your businesses success.

 

Since mentors can be from different industries, or even different geographical locations, it should be relatively easy to find someone.  It’s certainly less risky and time consuming than using trial and error or relying solely on your own perspective and experience.  And, once you experience a positive mentoring relationship, you might look forward to the day when you can become a mentor yourself. Have you found a mentor that has helped make a difference in your business? Share your thoughts with the SBOC community in the comments section.

Steve Strauss article - should you lower your prices?I love this quote from the late, great Paul Harvey: “In times like these, it is good to know . . . that there have always been times like these!”

There is no doubt we are in a tough economy, what with the possibility of a double dip recession and unemployment still painfully high. And you know what works in times like these? You bet, discounting.


Consider 1974 if you will. That year, President Gerald Ford had to deal with an ongoing, expensive conflict in Vietnam, a huge rise in oil prices and a drop in the stock market. Moreover, double-digit inflation was becoming the norm, and that, combined with stagnant growth, led to a new economic term - “stagflation”.

With the economy in such bad shape, it hardly seemed like a time to start a new business, but that is exactly what Super 8 Motel founder Dennis Brown did, and he succeeded because he tapped into the economics and mood of the time and created a business that offered low, low prices.

Specifically, Brown opened a new motel in Aberdeen, South Dakota, and set prices at a mere $8.88 per night. By 1979, he had more than 70 hotels in his chain, and today, Super 8 Motels is one of the world’s largest discount motel chains, with more than 2,000 locations.

So yes, low prices can work, and work big time. Many businesses, in fact, tie their brand to low prices and succeed as a result:

  • Wal-Mart
  • McDonald’s
  • Amazon.com

 

So the question is not whether lowering your prices can work, sure it can, instead, the question is whether lowering prices can work for your business.

 

Click here to read more articles from small business expert Steve Strauss.


Lowering prices does not work for every business, and the one time that cutting your fees usually does not help much is when you have a high-end brand. Mercedes Benz would gain little by suddenly selling their cars for a lot less because the brand is based, at least in part, on expensive luxury. Discounting would cannibalize its brand value.

That said, the low price strategy often works for plenty of small businesses, especially in this type of economy. People want a bargain right now, and if you are not willing to give them one, then they just might take their business elsewhere.

When I am out speaking before small business audiences, I often say that one key to business is to ask people what they want and then give them what they want. I bet if you asked your customers what they want, today many would say lower prices. So you should consider giving them that.


But as you do, you do have to be careful how you do it, and how much you do it. Lowering prices will bring in more people, yes, but it will also eat into your margins. Crunch some numbers before diving in the discount wagon.

One good way to start is to choose a loss leader. That is, pick a product or service that you think would be more popular if you put it on sale, and then put it on sale. The idea is to attract attention and entice new customers and clients to your business with a great deal. The loss of profit on that item should hopefully lead to more sales of other things, hence “loss leader.”


Aside from the loss leader strategy, discounting prices can take other forms:

  • It might be a regular sale
  • It can mean bidding lower than you normally would on projects
  • You might start offering discount coupons on Facebook or Twitter


Whatever tack you take, be sure that you let your actual and potential customers know that you are in fact giving them a deal. Mention it in your advertising and when you are chatting with them.


Low prices are a big selling point today, and if you do it, it is smart to take full advantage of it.

 

 


 

About Steve Strauss

Steve Strauss is one of the world’s leading small business experts. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. Steve is also the author of the Small Business Bible and his latest book is Get Your Business Funded: Creative Methods for Getting the Money You Need. A popular media guest, Steve is a regular contributor to ABC News Now and frequently appears on television and radio. His business, The Strauss Group, creates unique, actionable, entertaining, and informative multi-media small business content.

 

You can read more articles from Steve Strauss by clicking here.

  • Small biz optimism.jpgEntrepreneurs are optimists by definition.
  • The most successful entrepreneurs temper their optimism with a healthy dose of pessimism.
  • Pessimism is essential to identifying obstacles to growing a small business.
  • Optimists are more likely to be successful and earn more money than pessimists.
  • Success as an entrepreneur requires a mix of seeing the glass as half full and half empty.

 

Choosing which of the above philosophies to follow may depend as much on your past as your future. Perhaps you’re a serial entrepreneur with as many failures as successes under your belt.  Or, you’re a small business that has achieved significant growth during an economic downturn.  Or, you’re a former pessimist who now needs to motivate and inspire your staff through a change in business plan.  It all depends on your perspective. 

 

As you evaluate which category you occupy, it might be helpful to take a look at the benefits of optimism and pessimism when it comes to entrepreneurialism.

 

Optimism


According to expert speaker and author Dr. Martin Seligman, entrepreneurs and business executives who engage in sales activities need to be optimists.  He believes it takes a positive view of the future to keep picking up the phone or knocking on doors while facing rejection. It’s important to remain patient when there are few indicators of success on the horizon, to view every phone call or conversation as a potential opportunity, and to be able to see alternative courses of action when there are roadblocks.  Optimists view problems as temporary and specific to a certain time and place, as opposed to permanent and pervasive.  Even if you lean toward pessimism, retraining yourself to think positively is a good idea if you’re a small business owner.

 

new ventures.pngIn fact, there are many who believe that, while a healthy dose of pessimism might be warranted occasionally, it takes optimism to even start your own business.  As cited in Bloomberg Businessweek, “Individuals with higher levels of overconfidence and lower levels of risk perception are more prone to start new ventures.”   According to author and brain science expert Charles Jacobs, entrepreneurs need to be comfortable with self-sacrifice and delayed gratification – both associated with optimism. Further, since entrepreneurs identify closely with their businesses, having an optimistic attitude is needed to preserve self-worth.  Jacobs has shown that entrepreneurs who are visibly excited by what they do are able to get their employees to mirror this type of behavior. He argues that the best thing a leader can do is set an example by his actions.

 

Pessimism

 

Strong leadership should not consist of wallowing in misery or hyper-focusing on the negative.  On the other hand, there are moments in an entrepreneur’s life when a little bit of pessimism is warranted.  One way to tell if you’re overstating your chances of success is to look at your proposal through someone else’s perspective.  Have a colleague or friend pitch your idea back to you and then think about the viability of your proposal from a neutral perspective.  Your ideas might not look as strong when you step out of your own shoes for a moment.  Also, be careful not to get so pumped up after a seemingly positive sales meeting that you start making off-the-chart financial projections.  A little bit of skepticism might help you look at your data more clearly and make the adjustments that will lead you down a clearer path to success.

 

Would you consider yourself an optimist or a pessimist? Which perspective do you think is the best approach? Discuss in our comment section below.

Micro-business.pngIf you’re a micro-business, you probably know who you are – at least on the surface.

 

Approximately 77.5 percent of micro-businesses have fewer than 10 employees.  Around 22.5 percent have no employees.  About half are home based, and the other half work out of an office or other facility. These businesses are responsible for more than 65 percent of the gross domestic product.

 

But, do you have a deeper understanding of what drives people to start, and maintain, a micro-business?

 

There are many reasons why people start their own micro-business. Some may want more flexibility to pursue other passions, such as raising children or having more time away from the office. Others may have a vision for a new business idea, or identified an untapped market, that could only be brought to life if it was focused on 24/7.

 

Next, let’s look at what you may be unwilling to do while running your business. Do you derive so much pleasure from the business you started – which could include a home catering business to a five-star restaurant, or a home-based computer repair service to a software startup – that you do not have time for activities that might save you money?  For example, research has indicated that many small business owners find the time it takes to fill out forms associated with government tax breaks so onerous that they don’t even bother. The same reticence applies in many cases to spending a couple of hours every week networking in order to meet people that could help expand your business or secure federal or state government contracts.

 

Micro-businesses GDP.pngFurthermore, let’s examine how you spend your day. A day in the life of a “typical” micro-business owner varies tremendously, depending on your industry. However, research provides some insights into what you may have in common. For example, micro-business owners spend significantly more time on the Internet in comparison to other professionals, according to a study from Jupiter Research. This is not to say that you’re spending hours playing online video games or chatting with friends or family members.  Most micro-business owners are using the Internet to respond to content and engage in community sites targeted to members within their industry.

 

Now let’s take a peek into the ideal office of a micro-business owner. Studies have shown that acting as if you’re leaving the house for the office, and setting up a professional work environment, can help home-based business owners be more productive.  Suggestions to achieve this include getting dressed in clothing that is business casual; making sure family members understand that, even though you are working from home, you will not be available for non-work activities between the hours of 8 a.m. and 6 p.m.; and investing in furniture and computer equipment that is professional and comfortable.

 

Lastly, now that you have an idea of who you are as a micro-business owner, let’s take a brief look at who you are not. Research shows that the majority of micro-business owners are not interested in growing their businesses beyond a certain size.  A majority of micro-business owners started their own companies because they love the hands-on work they do and growing past a certain size would require delegating that work.  Also, many are more interested in the work/life balance that owning a micro-business allows. Therefore, growing into a multi-million dollar colossus is probably not on your list of professional goals.

 

Does this sound like you? What other traits and/or behaviors characterize micro-business owners?

By Reed Richardson.

 

It’s a tempting premise: rather than suffer through building a new business from the ground up, why not scoop up an existing one that’s struggling and turn it around? For prospective entrepreneurs long on ideas and short on patience, this strategy has long held a certain appeal. But is jump-starting a career in small business ownership, especially in the current economic climate, really as easy as buying someone else’s failure and turning it into a success?

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To be sure, buying a struggling business often has some distinct advantages, explains Stephen I. Butler, who owns his own financial and business brokerage firm, Butler Bank Consulting. Thanks to common features such as readymade staff, turnkey inventory and infrastructure, and an established customer base, acquiring an existing business can be an effective way to end run the sometimes laborious start-up process. Still, Butler says it’s worth pointing out that what is really being sold is someone else’s problems.

 

Diamonds in the rough are hard to find

At any one time, roughly 10 percent of the country’s six million small businesses are in the process of being closed, sold, or transferred, according to a 2011 “State of Small Business Report.” While that translates into well over half a million small businesses undergoing some kind of transition, the active marketplace for small businesses being bought and sold is actually far less than that. (The two major online business-for-sale marketplaces, BizBuySell and BizQuest, claim just less than 100,000 combined active listings for companies of all sizes.) And of those, only a small minority will be businesses in distress or in the process of closing.

However, after witnessing the glut of undervalued real estate properties now available, many budding small business owners may think there are similar diamonds in the rough to be had in the business market. But Marc Gudema, a business broker from outside of Boston, says the analogy just doesn’t hold. “What I hear a lot from prospective buyers is, ‘I just want a decent business at a really cheap price,’” Gudema explains. “But I have to tell them those kinds of great deals are all gone.”

In fact, a recent BizBuySell Insight report from earlier this spring suggests that the business market bottomed out over a year ago and is now slowly rebounding. “It is evident from the increasing median cash flow and median revenue of closed transactions that small businesses are showing stronger financials coming out of the recession,” the report concluded. “Therefore, there will likely be an influx of businesses on the market from owners who were hesitant to sell until their business performance strengthened.”

Buying a business is complicated; consider hiring a guide

The prospect of an even larger marketplace that, simultaneously, features fewer good turnaround candidates makes navigating the business-for-sale waters even trickier. So, to avoid getting swept up into an unwise or even shady deal, prospective buyers might want to strongly consider hiring a professional to help them chart the waters.  

Real estate agents and CPAs are sometimes used to broker small business deals when the transactions are heavily real estate or location dependent, such as the sales of gas stations or restaurants. But selling businesses is not what they do for a living every day, notes Steve Wain, who runs the New Jersey-based business brokerage firm Calder Associates. “Business brokers, on the other hand, have to be educated in transition law, insurance, due diligence, and financial lending,” he says. “But if they’re not certified by the International Business Brokers Association (IBBA), you really don’t know who you’re dealing with.”

 

In about three out of every four brokered business sales the broker is hired by and paid by the seller rather than the buyer. Still, seller-hired brokers often give free advice to prospective buyers on things like compiling their financial portfolio and drafting a proper offer sheet. The process of matching a buyer with a business being sold typically takes anywhere from six months to a whole year, depending on the size, type, and complexity of the company and its assets. Although sales of failed or distressed companies sometimes can be executed much more quickly than that, there’s no guarantee, since the financial and logistical problems commonly plaguing a struggling business may take months to thoroughly untangle.

 

As a result of this complexity, standard business broker fees usually range from 10 to 15 percent of the cash portion of the deal. “Anything significantly above that, you should run for the hills, no matter what kind of promises they’re making,” Wain cautions. He also emphasizes that the cash price—and therefore the brokerage fee—is commonly much less than the total amount the business is sold for, since that latter figure often includes loans and other types of long-term payout compensation. “And if it’s a fairly straightforward deal for a fairly small business,” Wain adds, “it’s possible to negotiate a flat fee instead.”

 

“It’s not like you’re going to Home Depot to pick out a company”

“Almost 90 percent of the time, buyers first come to us saying, ‘I want a business that will bring in x amount of income a month,” Wain explains. “That’s a dangerous attitude, because it’s not like you’re going to Home Depot to pick out a company.” Wain says most reputable brokers will regularly turn away these entrepreneurial-curious types, because they’re simply looking to collect an easy paycheck rather than put in the hard work necessary to revive a business that’s currently on life support.

 

Many of these merely curious potential buyers do have the sufficient means to buy a company, notes central New Jersey-based business broker Rick Fulton, but they are often underqualified and overconfident, a deadly combination. (A common source of first-time buyer funding these days is a cashed-in 401(k) from a former job, he says.) “I’d say 100 out of 100 times, the buyer of a failed or distressed business thinks they can do better than the seller,” Fulton says. “But 90 out of those 100 will never make it.”

 

There’s a reason, in other words, that every town seems to have at least one storefront or restaurant spot that is always either “under new management” or “going out of business” and it likely isn’t the owner’s fault. Fulton too, has encountered the same business site being pitched to him for sales help multiple times, as different entrepreneurs cycle through what is an inherently flawed business model or location. “They fall in love with it and overlook the realities, and then they’re surprised when they’re out of business within a year.”

 

The key to staying emotionally detached during a business transaction, most brokers say, involves due diligence. Steven Butler always tells his buyer clients to get as much information as possible about the business and then get a second opinion. “Get a look at three years of past balance sheets, if possible, as well as any audits by accountants, past tax returns, and reports dealing with the business’s accounts receivable. Then, take all that data and have it analyzed by someone with relative expertise in finances.” (For a more complete list of disclosure documents a buyer should see before purchasing, see the sidebar.)

 

But don’t stop there, Butler says. It’s also important to take a hard look at the struggling company’s reputation as well. Why? “Because many times, distressed or failed companies have burned all their bridges of good will with their customers, suppliers, and financiers, by failing to deliver on their promises, pay for inventories, or make loan payments,” he explains. And despite the presence of new ownership, this past behavior can often haunt an ongoing business undergoing a turnaround, forcing it into onerous circumstances, like operating by C.O.D. payment or having to seek out entirely new sources of capital.

 

Starting over vs. starting fresh

Though fast-forwarding into entrepreneurship may be the primary driver behind purchasing a distressed business, it’s nonetheless important to take things slow both before and after the purchase. Not taking the time to understand what makes the business tick, many experts say, is a common mistake first-time business buyers make. And for someone buying a distressed business, in particular, it’s imperative to find out what once made the company successful and what has since changed to make it fail.

 

“I call it figuring out the ‘secret sauce’ and every business has it,” Wain says. Even if a prospective buyer has all the financial data and has talked with the sellers extensively, there’s still no substitute for actually experiencing how the company runs on a day-to-day basis, he says. “It’s like trying to explain to someone else how to ride a bicycle, they just can’t understand it until they do it themselves. That’s why I tell all buyers to check their egos at the door.”

 

As a cautionary tale, Wain cites a recent business transaction in central New Jersey where a buyer bought an established Italian restaurant and, within six months of purchasing it, changed its menu and theme to that of a Japanese restaurant. Soon after, the business began struggling and ultimately failed. “You have to remember you’re not only buying the assets, you’re buying the customer’s goodwill too,” he says. “In that case, the new owner didn’t grasp that, and he squandered that goodwill with an unexpected change.”

 

According to many business brokers, the most successful buyers of businesses—distressed or otherwise—are people who currently own another business or have experience running a business in the past. First-time buyers, they say, usually have a difficult time learning how to both run a business and resurrect someone else’s business at the same time. That’s why Butler often advises first-timers to take a hard look at the advantages and disadvantages of buying versus starting fresh. “In the end, I usually advise potential buyers that it’s probably better to start from scratch than to try and buy an existing firm, especially one that’s failing.” 

 

And although it might sound obvious, if a buyer considering the purchase of a struggling business can’t find any track record of success at all, there’s really no point in worrying about the “secret sauce” or future customer goodwill because neither are likely to exist. “Don’t bother buying a business that was never successful,” Wain says bluntly, “you’d be better off just starting your own business.”

 

 


 

Resources you should know about.

To locate a nearby business broker, use the IBBA’s “Find a Broker” tool.

 

Want to know the four biggest misconceptions about buying a business? Check out the IBBA website to “Avoid These Business Sale Myths.”

 

What are the eight sets of documents every prospective buyer should get from the seller before purchasing a business? To find out, go to the New York TimesGuide to Selling a Small Business. Look under “Prepare Your Business for Sale (Now!)”

 

Need a handy checklist of questions to ask during a business sale? Check out Inc. magazine’s “What to Look for in a Seller.”

 

What are the characteristics that make a prospective buyer an attractive and successful candidate for purchasing a business? Read broker Marc Gudema’s blog posting to find out “What Business Brokers Look for in a Buyer.”

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