How To Downsize Your Company

In a recent survey of our business owner members, 93 percent expected to either increase or leave their workforce the same in the coming months. That said, there are many companies considering downsizing (or as we like to call it--rightsizing) the organization. No doubt, this is one of the toughest issues owners ever face, but if done correctly, it can help your company and its employees grow to be stronger than ever.

Determining what you need to keep the business afloat is extremely important, so take the time to evaluate the overall business and individual expenses. Unfortunately, the only way to respond to reduced profitability is by cutting expenses—not by borrowing more money.
When you are making big decisions such as this, you'll need a team of trusted business advisors or business coaches. They can help you work through the details. Below are a few steps to get you started on creating your plan.

• Take a hard look at your finances to determine if it’s a slight "cutback" or a full "cutthroat"—keeping only essential positions. Also, consider any creative alternatives. Many seasonal companies let their employees know they'll only be let go only for a couple months until work increases. Some are also able to cut hours instead of fully cutting an employee. That said, always cut deeper than you need—you never know what the future holds.
• Evaluate the critical skills and talents you need to run the organization. Keep your best people. Your team is what’s going to get you through. Most importantly, keep it all confidential.
• Prepare your action and communications plan for both employees being let go and those staying. Review it with a labor attorney familiar with your state laws.
• Communicate to the employees being cut at the same time. Let them know you are cutting positions--not people. Ensure managers making the cuts follow a script and are accompanied by another manager. Communicate only the essentials and then focus the meeting on unemployment and severance detail. Provide as much written information and paperwork as you can.
• Communicate to the remaining employees. Let them know the cutting is over and that cuts were made due to the market, decreased workload, lack of sales or loss of a key customer--whichever is accurate. Create a vision of the future for them. Consider sharing the numbers so they understand your decision.
• Communicate to your customers. They'll hear eventually, so prevent any issues by sending them a clear message as quickly as possible.
• Watch for morale or loyalty challenges over the days and weeks after. It can be easy for your remaining employees to fear they are next. Some may start to look for jobs. You need to communicate as much as is necessary to overcome their fears so they can focus on getting the company back on track.

Drive Your Success with Self-Accountability

Business owners love the fact that they report to no one. However, this same factor is also a prime reason why many fail to fully attain their personal and company visions.

Self-accountability is not an automatic process. It is a discipline that requires commitment. It also requires leaving behind the excuses and confusion that typically block the focus needed to get the job done. Executing a change to become self-accountable may seem arduous, but the following tools can facilitate this transition.

Take advantage of your time and talents.
It's easy to become overworked and overwhelmed with activities that are outside your competitive edge strengths. While every job has areas that aren't particularly interesting, the most successful entrepreneurs are the ones who feel exhilarated about their business activity. They are excited about what they do and remain accountable to what they are working on because they are using their time doing things they enjoy and for which they have a natural talent.

Learn to effectively schedule your time.
As much as this sounds like common sense, have you actually created an ongoing schedule of work and non-work tasks that you continually update and stay true to? Although doing so may appear to be an investment of time you just don’t have, I guarantee that once the method is established, it will not only keep you accountable, it will also give you back immeasurable time.

Create your own peer pressure for major milestones.
For truly important matters, I often put pressure on myself by announcing to others what I intended to accomplish. For example, let your associates, business coaches and colleagues know about your goals so they can hold you accountable.

Leave the excuses behind. Utilize the tools you already possess, and develop the ones you don’t to bring about the self-accountability necessary to achieve the personal and business success of which you dream of.

5 Financial Strategies to Implement Immediately

The economic news over the past few days has shocked businesses and consumers alike. And while Congress, Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and others debate the best ways to solve the financial crises faced by big business--the time is right for small business owners to tighten their strategies for the remainder of the year.

Where do you get started? Here are five tips to ensure you understand your finances--and can make informed decisions based on the facts.

1. Revise cash flow for the next six-month period.
   Have you created a cash flow spreadsheet for the next six months? If so, this should be reviewed on a weekly basis to account for any known changes that are taking place or will take place. Do not rely on your budget--instead rely on the current trend of your business to update your cash flow. Act now if there are any negative circumstances.



2. Do a monthly aging of accounts payable.
   If you do not have a monthly aging, begin at once. During challenging financial times, you will find that your customers will begin to pay later and later if given a chance. Stay on top of your receivables. If any are past due 60 days or more, call them. Do not be afraid to obtain liens or get your attorney involved. Your client or customer may not be around for you to collect in the future. In this case, “the squeaky wheel gets oiled.”



3. Review inventory for slow moving items--and turn into cash.
   This is not the time to sit on inventory. Cash is king. Reduce the prices to move out stale or slow turning inventory. You can use that cash to purchase fresh inventory with high demand resulting in increased sales and covering the cost of those markdowns. Old inventory only gets older.



4. Maintain larger cash position to take advantage of sale prices.
   Easier said than done, but if you can, these times will create tremendous purchasing opportunity for you. As many say, the U.S. traditionally has a great economy--things will turn.



5. Use bartering to reduce cash needs.
   Back to the olden days. See if you can trade your goods or services for things that you may need. There are barter organizations that you can join and get a larger universe to barter in. Google them for more information.

Lastly, keep informed on your business--and take a hard look at other areas of your business. While a down economy can be scary--it also presents prime opportunity to take calculated risks.

Where to Go When the Bank Says, "No"

With the bank crisis we’re currently facing, far too many business owners are at the mercy of others when it comes to business financing. Here’s one way small business owners can win at the high stakes games of business financing.

For most small businesses, a Small Business Administration (SBA) loan is the most advantageous financing available. SBA loans offer lower down-payments and longer re-payment terms than many other financing options. They are smart, affordable solutions for small businesses looking to grow their business. If your efforts to find money have been met with a resounding “No” from banks and commercial lenders, you will find these lenders will usually say “Yes” if the SBA guarantees the loan.

SBA eligibility requirements vary from loan program to loan program, but you will find the requirements are broad and designed to accommodate a diverse number of small business financing needs. You will find answers to most of your questions regarding SBA size standards at www.sba.gov/size/part121sects.html.

The most-used SBA loan program is the 7a program. The 7a loans may be for short-term and/or long-term financing needs. The maximum loan amount is 2 million. These loans can be used for most business purposes, including commercial real estate, construction or renovation for owner-users, business acquisition and start-up, franchise refinancing, refinancing for existing debt, equipment purchases, working capital and inventory.

Re-payment ability from the cash flow of the business is a primary consideration in the SBA loan decision process, but good character, management capability, collateral and owner's equity contribution are also important considerations. Sufficient assets must be pledged to adequately secure the loan to the extent they are available. The collateral may be in the form of business assets (receivables, inventory, equipment, real property, etc.) or may be personal assets (deposits, real property, etc.).

Most banks participate in the 7a loan program. The borrower works with the lender, who arranges with the SBA for a guarantee of 75 to 85 percent. The SBA processing time generally takes 8-15 working days upon receipt of your application from the bank.

Five Tips to a More Focused Marketing Plan

This is an especially challenging time for many businesses. Marketing and communication plans in a slow economy need to focus on short-term goals that can be achieved with a higher probability of success. Focus on leads with immediate potential and tap existing clients that have additional business opportunities.

Re-evaluate Priorities
All communications should have the ultimate goal of increasing sales. Determine which marketing programs or tools have been the most successful for your company in the past and concentrate your efforts on those sales initiatives.

Concentrate on Your Core Business
Determine which issues are vital to your organization’s success. Revisit your value-proposition to your clients and prospects to determine if it is applicable to today’s market. Focus on communicating the benefits, features and applications of your products and services to a well-targeted group of prospects.

Develop a Set of Success Metrics
Pre-determined objectives are helpful in verifying if goals are being achieved based on the money and time expenditures devoted to the project.

Keep Current Clients Happy
Customer retention is a must. Increase your communications with your customer base through visits, telephone calls and custom publications, such as newsletters, to let them know they are important.

Stretch Your Marketing Dollars
Utilize the trade and advertising media that directly reaches your targeted audience. Avoid broadcast or general advertising. Contribute articles for industry publications and be a guest speaker at key industry functions.

2008, and possibly 2009, may be difficult years for some businesses. Those companies that are cost-effective and focus on their target market will come out on top.

Family Business Hiring Policies

One of the best things about being a business owner is that we control who works with us, which may or may not include relatives. The type of people we employ and with whom we spend many hours working together greatly affects our work enjoyment level. A good working relationship with a family member can bring a great amount of happiness to life. A bad working relationship can bring misery.

Family member hiring and firing decisions impact the relationships the family business leader (FBL) has with relatives inside and outside of the business. There is no right or wrong policy for hiring family members. The key is that there needs to be a written policy to avoid hard feelings.

The written hiring policy should explain to family members—before hiring— that you expect them to have the highest standards of conduct and the best work ethic in the company. They should know, and be later reminded, that they will set the tone for non-family member employees. They have to be good examples, not giving excuses. Their reward is the knowledge that when they compete with a non-member employee of equal skill and attitude, they will get the promotion. If it is the case, the policy should state that they will not get it if the non-member is a better candidate.

The policy should be strongly worded regarding confidentiality to which the family member employee must conform. They will inevitably have access to plans that cannot be revealed to staff. If a confidentiality breach takes place, it will be grounds for dismissal.

The hiring policy should express that the new family member will have a written job description before starting with the family business and will be required to rewrite that job description after three months on the job.

One benefit of a written policy on hiring of family members is that the individual family member employee, the rest of the family and the non-family employees of the business have confidence that the hired family member has earned his or her spurs.

Most successful family businesses follow a clear policy for family hiring and firing. The FBLs of the family businesses that make it to the next level clearly know what he or she wants to achieve when bringing family members into the business. Having a written policy that can be discussed before the mutual commitment is made by the FBL, to hire a new family member and before the family member agrees to be hired, will alleviate any gray areas.

Making Positive Changes to Your Company

Sometimes an event, whether positive or negative, can cause you to take a closer look at your company. You can use this event as an opportunity to analyze your company more deeply and embark on a course change that will be best for the company’s future success. Here is an effective way to start the process once you have envisioned your course change.

Set new expectations with your executive team or key employees.

Communicate your vision and initial plans with your executive team or key employees first to gain buy-in or resolve any challenges. What are the infrastructure changes that must occur in order to support your course change? For example, if you invest in sales to drive that growth engine with more human resources, be prepared with the company support to deliver on all those new sales. How might you separate duties, create focus and pave the way for scalability to support growth?

Stage a company meeting event to communicate your expectations to all employees.

Do something inspirational to rally the troops! Share your vision, your course change, projected results and how it translates into more opportunities for all employees in the way of professional growth, advancement and compensation. Have fun things in the room—make it a celebration focused on the future.

Survey employees after your company meeting to assess your communication effectiveness.

You can survey employees with a simple 10-question evaluation of key points you hoped to impart to them during your company meeting. Be sure it is completely confidential and provide an option for open comments, concerns or suggestions that you, as the owner, commit to reading.

It’s your company, your vision, your goals—and your responsibility to be clear not only in your communications, but also in your actions. Successful change takes place only if you’re leading it effectively. If you have been getting involved in too many daily details—whether due to interest, passion or need—you’ll want to refocus on the big picture ideas and activities that create greater impact on results. Then, watch your company surge to the next level.

Selecting a Successor

Why is it that most family businesses do not make it past the first generation? One reason is that family business leaders (FBLs) fail to properly appoint the right successor, or one at all, and create a workable succession plan. This is an all-too-common cause, making family businesses “curses” for remaining family members after the former FBL is no longer with the business.

Family member successors are often picked because of family reasons, which may be the wrong reasons. As a result, these successors are put in a position to fail because they do not have the skills or personality needed to succeed. Not everyone has the passion, aptitude and leadership personality for being an effective FBL. It isn’t fair to put the son, daughter or other relative in that position if they do not have those traits.

“What do you mean I can’t run the business forever?” As silly as this statement may sound, it shows how illogical it is for an FBL not to have any successor chosen. Yet many FBLs hold and control the day-to-day leadership role in their family business right up to the moment they take their final breath. They postpone or entirely ignore picking a successor until it’s too late.

Even though succession selection is one of the most important business decisions, it is often never made. Most of the reasons business owners don’t address the subject of succession selection are nothing more than excuses based upon obstacles around which they could successfully navigate. Every rationalization for not addressing succession planning can be, and should be, overcome.

You can’t run your business from the grave, but implementing a few steps beforehand will give you a greater chance of continuing to run under the leadership of your chosen successor long after your own batteries have run down. Selecting a successor in a family business is no easy undertaking, especially if several siblings are in the running to be the new leader and the parents have treated and loved their children equally all their lives. In fact, surveys show that not formally selecting a successor is more the norm among FBLs than it is the exception. There is an aversion on the part of most FBLs to succession planning.

The choice is yours. The succession selection can be an intimidating process, but it can also be a process filled with the spirit of joy and giving. Taking a positive approach, keeping an affirmative mindset and looking out for potential snags along the way will all make for an easier journey.

A Bad Economy Does Not Mean Employees are Not Looking for New Opportunities

Over the past several weeks, we’ve been interviewed by several publications regarding the economic downturn we are currently facing—and the topic of hiring comes up quite frequently.

The difficult state of our economy has led many companies to re-evaluate systems, processes and expenditures to look for ways to save money, be more efficient and either become or remain profitability. One critical component companies must not overlook, or take for granted, is their staff.

The rise in unemployment often leads employers to become overly comfortable, believing their staff may be one of the most stable parts of their business. Caution—a down economy with increased unemployment rates does not mean your employees are not looking; in many cases, depending on how you handle the situation, it may mean just the opposite.

During challenging times, when business is not as prosperous as it was previously, most companies will look at where they are being frivolous, or explore areas where they could cut back or be more efficient. These actions may lead employees to believe that the company is in trouble, resulting in the belief that their job security may also be in trouble.

It is more important than ever to communicate to your staff that these actions do not mean the company is in trouble, but rather the company is being responsible. Explain to them how the company is doing, what steps you’ve taken in order to weather this challenging time, keep the company healthy and how your team will be affected in order to alleviate some of their concerns—or the urge to look for a new job they feel may be more secure.

Keeping your staff informed will not only put their minds at ease, but also gives them the confidence to communicate to outside parties that the organization is doing fine and will be successful throughout this time.

Don’t be afraid to ask your team for maturity, understanding and leadership during these times. Explain that many companies do well when things are easy, but it’s the great companies who do well when times are challenging. Convey to your staff that you believe they are the team that can get the company through these tough times. In addition, it is very important to acknowledge and show appreciation for their dedication to the company and their flexibility to do what is necessary—even if it means longer work hours and increased job duties.

If the well-being of your organization is not clear, people may make decisions on what they fear rather than what is the reality. You always need your people, but in a down economy, your people are more important than ever.