For a small business, one of the most difficult tasks is to collect on receivables: invoices.  Small business owners work very hard on building a strong relationship with each customer.  Many even become personal friends with clients.  Therefore, it can become very difficult to collect money when it’s due, and it gets harder and and more uncomfortable with each over-due minute.   But cash is cash and is the life-blood of our businesses.  So what’s the solution?

My advice is to have a very aggressive, disciplined cash collections process, as such:

1. Get your invoices out on time.  In fact, I say get them out early.  I used to send invoices to builders even before we were finished with our work, knowing that they typically pay 45-60 days out.
2. Be firm on your invoice.  Make the due date clear and consistent.  If you need to be a bank and offer terms, then getting this invoice out on time (i.e. early) is even more important.  Be sure to include a little nudge, like “please remit payment immediately.”
3. Give them a small grace period after the due date, but once they hit that date, send them a ‘nasty-gram’ immediately.  Politely inform them that payment is past-due and that you expect payment in full immediately.  This letter can be gracious and firm.  And because it’s a letter, it is impersonal enough that it shouldn’t get in the way of your relationship.
4. If the customer still hasn’t paid, then it’s time for a phone call: “Hey [name], can I stop by and pick up that check?”  Friendly, but with a firm expectation of payment.

You can come up with your own formula.  The point is to have some firmness and some discipline.  That sends a message to your customers that you expect payment, and they will start to put you at the front of the line when they write checks.  This will also help you maintain that great relationship because there won’t be any hard or uncomfortable feelings that go along with a long-outstanding invoice.

A while back, in another business, I found myself asking a supplier for extended terms to buy some equipment.  I had been a good customer and wanted to know if they could give me 60-days on a few invoices.  Their response, at first, really put me off: “Sorry, Stuart, but we’re not a bank!”  Not a bank?  What?  I was just asking for some extra time!

The point is a real understanding of cash flows.  You see, my supplier also had their own suppliers, whom they had to pay on time.  If they extended me some credit, then they’d have to find the cash to pay their own invoices.  They probably get that from a line of credit (I’m making some other convenient assumptions, here).   They pay interest for a line of credit to a BANK.  So, in order to make extended terms to their customers, they’d have to charge a fee/interest to cover their own fees/interest, thereby turning themselves into a bank.  They were smart enough to know that 1. they were not in the banking business, and 2. there ARE banks out there for that reason.

Why do I bring this up?  Because we’re talking about YOUR cash, the life blood of your business.  Don’t allow your customers to use you as an interest-free bank.  When you give ANY terms on your invoices, you are lending them money with zero interest.  Your goal should be to collect that cash as soon as possible.  So my advice: when asked for special terms, gently let them know you’re not in the banking business, but you know a few banks who might be able to help.

Much of the advice I give is in keeping focused on your end game, what I call the Big Picture Goal (BPG). It’s this focus, I believe, that will keep you busy doing the right things, those things that lead you to business success. It’s classic ‘Begin with the end in mind” strategy a la Covey, Collins, and Kiyosaki. But what happens when you finally get there?

Here’s what:

1. Set a new Big Picture Goal. Maybe your BPG was to get to $1,000,000 in sales and you made it. Now, you might set a new BPG of $10,000,000 or a second location doing the $1M. Alternatively, your BPG might have been more short term in order to ensure survival, and now you’re ready to look even bigger!
2. Sell the Business. An admirable end for any business is to sell it and retire financially independent. If that is what you have in mind, then start researching how a business in your industry is valued (multiple of sales, multiple of profits, value of assets, etc.) Then, you can start planning for the Big Sale!
3. The Succession Plan. You might want to step aside and have a new leader manage your business. Just as Bill Gates stepped aside and allowed a ‘real’ CEO to run his company, you might want to set up a plan of succession for a manager/CEO to take over the day-to-day operations of the business. That new manager can SMS text you the good news while you’re fishing!
4. Close the Doors. Sometimes, the owner is the talent of a micro-business, a talent that just can’t be passed on or sold. If this is the case, then a plan of creating investment savings from profits might be the end game. Yo u still want to leave this with financial security. However, I would still recommend you look for ways to replicate yourself (licensing, website, write a book, etc.).

So, what’s your end game?

I saw a truck the other day that was wrapped bumper to bumper in bright yellow and red, for a painting company. It was quite a change from the typical paint-drip decorated white pickup with ladders you normally see a painter driving. What stuck out to me most was the marketing effort, again rarely seen in the painting business. It made me think that this business was a marketing business whose product is painting houses.

That led me to think about some past seminars I’ve given and blogs I’ve written about “What business are you in?” That question was answered in a short list of types of businesses, identified by the ‘need’ they fulfill for their customers. For example, the need for physical health can be met at a gym. This painter’s truck made me start to reconsider that angle. While I’m not ready to change my ideas completely, I am ready to start considering that we all need to be in one of three types of business:

1. I’m in the Customer Service Business! I’ve always said that Southwest Airlines is in the Customer Service Business. Their focus is on the passenger. I’ve even contended that if you were to take away their airplanes and give them, say, running shoes, they would continue on without a hitch, because they are in the customer service business and simply use their products to deliver that special experience. One of my favorite lines is, “We don’t want to tell YOU we have great customer service, we want YOU to tell OTHERS!” Know where that came from?

2. I’m in the Sales Business. Again, this business is not about the products, but is about building relationships with its customers. The focus is on creating a finely tuned sales machine that increases that top line each month and each year. When product is considered, it is designed with the sales process in mind. I might put Amazon.com in this category. They have built a great sales machine. They keep adding new products without a hitch because their sales system works so well.

3. I’m in the Marketing Business. Proctor and Gamble is in the marketing business. They know how to create products driven by their market, get it positioned right in front of them, and get the word out so that their customers flock to purchase thier products. They are not about the ‘best widget available!’ They are about marketing.

So, am I recommending that you become a Sales, Marketing or Customer Service Business? Yes! However, I’m not asking you to abandon your core strength, which is creating products that satisfy your customers’ needs. I’m simply recommending that you make one of the three methods central to your business. That way, you’ll get a steady flow of the customers you need.

Have you seen that inspirational video that’s going around? You know, the one about the difference between 211 degrees and 212 degrees of water. Just one degree is the difference between steam power and just water.

Here, take a look:

To get your business to the 212 degree boiling point, you must have many flames burning: marketing, sales, operations, cash flow, teamwork, goals, etc. There are two keys to being able to do this:

1. Keep that Big Picture view of your business. This is the temperature of the water, your company’s raison d’être, it’s ‘reason for being.’ Call it strategy, bird’s eye view, the view from 20,000 feet, whatever you want. The point is to know maintain this focus while working on all the small flames that will boil your water!
2. Manage all the flames (goals, plans and details) that will bring that water to its boiling point. Which flames are contributing to your boiling point? Which are not? Which need more fuel to burn, which can use less? As business owners, we have many flames burning, and we need them all to get that water to its boiling point.

To help you balance your flames and keep an eye on the big picture, I recommend a good plan. Sit down and map out your plan:

1. Strategy: Map out your strengths and weaknesses in your market as compared to your competitors
2. Cash Flows: forecast your sales, plan your monthly expenses; compare these to actual results each month and make adjustments
3. Marketing: Write out your promotional plan for the year and make sure you do it each month
4. Goals: identify your Big Picture Goal and figure our what its going to take to get your there (all the flames)
5. Metrics: find the numbers that will give you the pulse of your business: sales, profits, sales per transaction, etc.

Then, keep an eye on these plans every month. Pretty soon, your water will start to boil.

This is one of the most favored lines of an entrepreneur: “I work twelve hours a day!”, or “I work 80 hours a week!” I’m starting to wonder, “Do you really love what you do, or are you just bad at it?” I think as entrepreneurs, we are too creative and innovative to put up with working those kinds of hours.

Now, I know that if you’re a small business owner, you are probably putting in these long days. My point is not to insult you, but to get you thinking about a new way to exist. If you sat and took a good hard look at your day, would you realize that you could take just as many steps toward reaching your goals in much less time? How many hours could you cut out of your schedule each day or week?

I propose getting onto a Time-Loss Program (as opposed to the good old Weight Loss Program). Use these tips/ideas to help you get rid of waisted time:

1. What tasks can you delegate or outsource?
2. Where can you move from “perfect” to “good enough” in order to save time?
3. How could you better manage your calendar to save time in travel, meetings, and events?

Once you start thinking this way, you’ll be amazed at how much time you can get back: time to think big; time to explore; time for yourself.

In his comment below, Renato brings up the notion of the ‘up sell’ you normally get when ordering dinner.  This is the sales lesson I mentioned in the end.  Great point, Renato!

The lesson here is the Top-Down Sale.  There are three places this is very common.  Think about the last time you purchased one of the following:

• A car.  After you told the sales person what you were looking for, did they take you right to the most expensive version of that?
• A home.  Did your Realtor start your search at the top, meaning the highest priced homes?
• The Stereo Store.  Ouch.  These guys are the best (or worst)  at this.  Ever say you’re looking for a TV and get taken straight to the home theater displays?

The last example is the dinner table at a restaurant.  Whenever I try a new place to eat, I always ask the server what he or she recommends.  I like to know if they’re going to recommend the surf-n-turf, $54 plate.  One look at me, and they know right away I can handle such a plate!  I’m always surprised when the response is, “I like the pasta plate!”  First of all, I have never ordered pasta, but that’s beside the point.  The point is the server missed a great opportunity to sell me the granddaddy plate and, therefore, increase his/her own tip.  There is a local restaurant that is great at this.  I rarely leave there without some sea creature’s tail next to my steak.

‘Did you save room for dessert?’  How many times are you on the fence when it comes to dessert?  You are really too full to indulge, but you also know this place makes the best cheesecake outside of Manhattan.  All it takes is a little nudge from the server and cheesecake it is!

In thinking about your business, are you offering your clients the best you have to offer (the lobster and fillet)?  Are you making sure they’re getting the whole of your services (dessert)?

This one, simple concept of the Top-Down Sale can have a significant effect on your top line: revenue.  By simply offering your customers the best possible option, you will see an immediate increase in your sales revenues.  Now remember, we’re not out to steal from your customers.  Don’t push them to purchase the home theater when all they want is the extra TV for the guest bedroom.

Next time you’re out for dinner, put your entrepreneur cap on and check out the customer service and sales job your server does.  There might be a great model to use for your own business!

While watching some incredible footage on the Discovery Channel, I kept seeing some of nature’s most amazing marketers. Spiders, plants, birds, and other animals have each become experts in the 4 P’s of Marketing, namely Product, Place, Promotions, and Price.

Let’s look at Place first. In order for your market to buy your products or services, you must Place these products where your customers can get them — and easily. You’ve heard the expression the three most important things to a retail store: location, location, and location. Well, there’s a creature out there who has mastered ‘location’: the spider!

The late, great Peter Drucker said, “…the aim of marketing is to make sales superfluous.” In other words, if you are able to put the 4 P’s of Marketing together properly, you won’t have to go out and sell your products/services, your market will come to you. You’ll notice the spider picks a location, sets up shop, and simply waits for her meal to deliver itself into her web. She does not need to do a dance, send out a call, or fill the area with an aroma. She simply waits.

If you imagined capturing your market with a web, where would you build it? Think about location, time, and activites. Once you figure out where and when your market is moving, you will be able to capture their attention and their business.

As many of you know, one of my favorite foods is the famous Buffalo Wing.  In today’s blog, I’ll cover The Chicken Wing Guide to Small Business.

Here are the Categories:

Suicide.  If you’ve ever eaten a ’suicide’ flavored wing, you know that the first two, three, maybe four wings are really good.  However, by the time you start to pick up the fourth or fifth wing, all kinds of alarms are going off trying to keep you from the next wing: cleared sinuses, sweaty forehead, blazing mouth, and rumbling stomach.  A small business in this category is the one that outgrows its strategy and quickly heads down the path of destruction.  These are the businesses that seek out the one HUGE customer that will make them rich.  Instead, they find that that customer leads to a faster exit.

Hot.  These are the best wings.  Full flavor plus the punch of a good, hot sauce.  A HOT business is one that is finally cooking.  Typically, for a business to be HOT, it must catch a break.  A key alliance, deal, or breakthrough will take this business quickly from Medium to HOT, but avoid the suicide temptations.

Medium.  Medium is safe, for both wings and business.  A medium-flavored wing will have some of the zing of a HOT wing, but save the mouth from the fiery after effects.  A Medium business is a little more mature.  It has weathered the startup storm and has moved on to the ‘cash cow’ phase of business.  New sales will come from referrals and word-of-mouth.  This business has been there, done that, and doesn’t need to impress anybody by trying too hard.

Mild.  We’re starting to reach the limits of way I’d call a true ‘Buffalo’ wing.  Eating a wing with Mild sauce says, “I’ll join you in eating these things, but I’d really be eating something else.”  Same thing for the Mild business.  This business is likely to be more of a hobby than a business.  From mowing your neighbor’s lawn to selling crafts once a year at a show, this is not a full-time gig.

Before closing, I should mention Teriyaki and Honey BBQ.  I normally would not accept Honey BBQ as a wing sauce, but the inventor of the original Buffalo Wing, the Anchor Bar in Buffalo, does offer Honey BBQ — so it gets an exception.  Teriyaki, though, will not receive an exception.

So, what kind of business would I describe as Honey BBQ?  This is the business that was fueled by Passion!  This business owner would not take “NO” for an answer.  When everyone else was full of doubt, this entrepreneur was full of enough spice to push her/his way through and was sweet enough to get what they needed!

That’s the Chicken Wing Guide to Small Business.

Where can you find the hottest businesses in Chandler?  At the Chandler Chamber Community.

Where can you find the best wings in Chandler?  At Teakwoods Bar and Tavern (SEC of Ray and Kyrene).

Chances are, you’re NOT thinking of selling your business anytime soon. But…all of us should be thinking about the possibility. I am not suggesting it’s time to get out of the business. I’m suggesting that you get your business in shape to be sold.
We have all heard that the point of a business is to be profitable. A profitable business allows you to do all the things you’re really after: doing your craft, liesure time, riches, etc. I say we take it one step further. Be more than profitable…make your business sellable. What does that mean?Here is what you’ll want to look at:

1. Debt. You want to make it a goal to get rid of your business debt, whether that is credit cards, an SBA loan, or a loan from grandma. Any balances that are due within the year should be less than the amount of assets that are easily turned into cash: inventory, cash, receivables.

2. Net Income. You want to get your bottom line big enough that it will support you AND the business. You want your business to provide you a good income AND be able to grow itself, keep itself modern, and save for a rainy day.

A business that has been around for a few years can focus on reducing expenses, paying down debt, and increasing sales (even by a little bit). That will help create a sellable business.

So, regardless if you plan to sell your business or not, I recommend you take a look and see if anybody would buy your business. If the answer is ‘no’, then you’ve got some work to do. If the answer is ‘yes’, then keep up the great work!