Little Success and Great New Happenings

Marketing was one of the first things on my agenda when I came aboard. Marketing was only second to straightening out the bank register.

We needed new customers. I began reading everything I could get my hands on about marketing, advertising and sales. Direct mail continually came up as a good beginning to our marketing plan.

All I had to do was design some post cards, figure out how to say what I wanted to say, my list of companies I wanted to mail to, and slap some stamps on them.

The post card designs were fairly easy, not to mention a little fun. I decided to do two styles for two different industries we deal with. The first industry I targeted was a big money earning industry. The second is what I consider our bread and butter customers. I played with words and phrases for about a week until I was satisfied with what I was saying and sent each of the designs to the printer.

In order to understand how well direct mail would do for us, I selected 100 companies in each of our target areas. The return on the big earning industry was 2% and we've retained 1. The return on the bread and butter industry was a whopping 15% and we've retained them all. We popped a bottle of champagne over that!

I had ordered 1000 of each design, so I was able to send these cards out on other occasions as well. We put 250 of the bread and butter post cards aside to pass out and mail to our existing customers. So we've increased a bit of business by reminding our current customers the extent of our capabilities.

We will be doing this again with 1000 of each style soon. I'll let you know how well it works next time around.

Taking Risks With the Future

I've mentioned that I get to see what it's like to own a business without the risks. This is only partially true. I never had to make an investment, and I'm not responsible to buy things for the shop out of my checking account. However, be careful what you ask for.

I have been interested in owning my own business for a few years. Since a friend of mine owned a business, I thought it would be a grand idea to learn how to go through the motions. This business isn't a startup, but after being crushed by the post 9/11 economy we're in a rebuilding phase (or going out of business phase).

When we perform a job and then have to wait more than 30 days to be paid for it our cash flow isn't healthy enough to get us through. The guys on the shop floor are, in my opinion, more important than I am. We wouldn't be in business if our manufacturing floor had no employees. Whereas the business would only suffer without an office person to smooth things out.

My ego is large enough to cause me to think it would suffer incredibly! However, I am the one who doesn't get paid on time if the business cannot collect on past due invoices. I eventually get the money that's due me, however I have gone 3 weeks without a paycheck before. It's usually not more than a week though.

So, in a way, I am taking a risk that is usually associated with being an owner. And making the decision to pay others first would be an emotional risk.

My employer hasn't been able to pay himself in over 6 years. So, I'm not complaining I'm simply learning.

A View from Two Sides

As a customer walking into a business with depressed, stressed, irritated, unyielding employees, I pause. If it happens to be a restaurant or any food service with irritated, angry employees, I walk out. If it happens to be a retail store with depressed, non-functioning salespeople, I walk out. I prefer to support a business who likes their customers enough to leave their personal problems at home.

When you are faced with this situation do you choose to open your wallet and support a business who obviously has some personal issues to deal with? I am told, and it is half believable, that consumers have all the power over the economy.

It is only half believable because I see how much power a business has over the economy as well. Yet, are consumers giving business that much power by opening their wallets when they shouldn't?

I'm sure you have heard how much power you have as an individual over money matters in America. Next time you need or want to buy something, consider who you're buying from and whether you really should be supporting them. In other words, appreciate the power those people in the ivory towers claim that you have. They may be right.

Bread and Butter - Part 2

The company I spoke of in my last post is still in business. They have lost many of their employees along with the bread and butter customers. I was one of those employees.

Last I heard, that formerly $14,000,000/yr company is now worth only about $6,000,000/yr, and still sinking. All of my old co-workers who I'd built friendships with are no longer there, so I will not know for sure how that company is doing from now on. I only have one small clue... I visit their website about twice a year to see if there have been any changes. So far, there are 3 pages that come up with a 404 error, the starting flash page has some glitches, and there has been nothing added or updated in about 3 years. It's only a small clue, but it's a revealing one.

My current company will stop working on large jobs to take care of the little guys. The little guys are the easiest to take care of and negotiate with (not to mention they're fun, the big dogs seem to have lost their sense of humor somewhere along the way). They are usually honest about when they need their work done and whether we really need to stop working on our current job. They are aware of our scheduling issues and aren't terribly demanding of our time unless it's a true emergency.

Our big customers came to us because of the referrals from the little guys. We have never gotten a new customer from a big dog.

Who do you concentrate on in your business? Who are you more willing to bend over backwards for?

Be very careful who you choose to romance in business. Those $50/month customers may be giving you enough referrals to amount to $50,000/mo. That $50,000/mo single customer will go to the cheaper guy in a heartbeat, leaving you hanging and twisting in the wind.

Bread and Butter - Part 1

I used to work for a small/mid-sized manufacturing company that made an incredible mistake.

The owner bought it when it was only worth $250,000/yr. He built it to a $14,000,000/yr company in only 9 years. It was exciting to work for a company in growth. The atmosphere was one of friendship and fun. All the employees knew each other, we liked each other, we worked as a team, we spent time with each other after work, we were proud to work for this company. And all of us liked and respected the owner, my direct boss (note: past tense). He was the first boss I'd ever had who I truly liked.

This atmosphere of friendship and respect extended to our customers as well. We knew our customers by first name. Many of us built friendships with our customers. We invited our customers to barbeques, pot lucks, and weekend sports bar hopping.

We suddenly started seeing big pretty carrots placed in front of our faces. We had three very large companies make wild claims about how much product they were going to buy from us.

The first of these big dog companies started to buy products. They bought no more than $10,000 a month and only averaged about $7,000. This only lasted 8 months before they disappeared completely. Their promise of $8,000,000/yr never materialized.

The second and third of these big dogs never bought even one unit. They spent months on prototypes (nonchargeable), retooling, branding and tweaking everything in sight. But not even one finished product went out the door to be delivered to them.

While these diamond encrusted carrots were being dangled in the face of the owner, he decided to put a minimum limit on all orders. Our friendly customers who only bought a few units a months were essentially told they weren't good enough for us. Even the customers who bought a fairly substantial amount of units were told it wasn't good enough.

After all, we were tooling up for mass quantities. How are we supposed to schedule a run of little guys when we're going to make all our profit from 3 big dogs?

We not only lost our bread and butter, we never truly got the big dogs. So after a 9 year run of growth and excitement, we fell from $14,000,000/yr to $8,000,000/yr in only 1 crushing year.

Do the math! How much were those little friendly guys worth to that company?

We lost our bread and butter....

Irritate the Gatekeeper for Sales

Who thought it would be a grand idea to have recorded telemarketing calls? When these calls come to my home phone, I am irritated. How much more irritating do you think it is when I'm at work attempting to help a customer and the phone rings... and I hear a recorded telemarketing call.

The first thing that pops into my head is our current economy, and I begin to ponder how many people are out of work because of a recording. The second thing that pops into my head is how cowardly these companies are that they can't even have a live person listen to me hang up on them.

However, I will stop and listen when I have the time. I make careful notes on the business described in the recording (if they ever get around to announcing it). And I make sure the shop I work for doesn't become a customer of theirs.

Here is a tip to keep in mind if you are considering this avenue of sales. The first person to answer the phone in any business is the one you really need to impress. We are the gate keepers. We are also the keepers of the golden keys. Most of us are very cold and calculating if you aggravate us. We are not usually the person you need to speak with, and you will not be directed to the correct person if we are not impressed with you. We certainly will not sit through a recorded call to figure out which person your company actually needs to speak with. The golden keys will be used to lock the gate after we thoroughly enjoy kicking you in the arse as we slam the gate shut.

In Quite a State

State taxes are a completely different animal! The employees who work with state taxation cannot, under any circumstances, speak in human language. If you read the pamphlets they send out, or read the websites they provide, you will hear it parroted. Go ahead, I dare you to ask these people a question! I challenge you to try to get them to speak in their own words.

You will hear "In paragraph number... section number... revised date... amendment to..." It really is the most amazing thing. It's nice to know that robotics has achieved this level of advancement. But, when I ask a question, I need help. I need help beyond what the booklets and websites are telling me.

The problem I needed to sort out was that a tax was paid that we don't owe (not the right kind of business for that tax), the tax we owe was not paid, one tax went to the wrong department and they kept it... It was a confusing mess. And again there was 4 years of this confusing mess to sort out.

It would have been far less painful for me to bash my head against a brick wall than to try to sort out the mixed up taxes with the state. The saddest part of the entire experience is that I know someone who works at the state revenue department. Even when he had me talk to the people he recommended, I still couldn't get anywhere.

Hindsight is 20/20. The more I analyze this situation, the more I realize that my friend has only the bare minimum requirement of human personality (only enough for survival). He's been assimilated! Either that or one of the prerequisites for the job with the state revenue dept is to have no personality.

I'm still holding to the belief that state tax employees are just very advanced robots.

After arguing and battling with these robots for over a year, my boss told me to just give up and pay it. So I followed his orders, like a nice little girl (and, I have to admit, I was very relieved). I have made sure that anyone who may come in and take my job in the future will understand which tax to pay to the state and how to do it. I've also left notes warning them about the Borg.

The Big Bad IRS Man

I am not a tax expert. I'm not a tax accountant. I have no formal training in taxation. I've acquired limited business tax knowledge through different avenues in life. The owners of this little shop had gone 4 years without filing or paying tax to the big bad IRS man. This is one of the reasons they asked for my help.

So, I started this job in a firestorm of IRS letters that were quite unsettling and a bit threatening. We've all heard the horror stories of people who have gone through IRS audits. We've all heard about what can happen when you don't pay taxes. And here I am, with limited knowledge, trying to appease people who have been described as no less than monsters.

What I have discovered is that the IRS is the easiest, most helpful, most informative tax agency in existence.

My first action was to call them and make sure I had the right to talk about the taxes on behalf of my employer. A few papers and faxes later, with help and advice from the big bad IRS people, I was able to discuss every aspect of what was owed as well as what was going to be owed on the next tax year. The problematic taxes were W2/W3 and the owner's personal 1040.

The second item on the agenda was to make sure the amounts were accurate. The non-filing penalty for W2/W3 is $50 for each employee. The penalty we were assessed would mean we have well over 100 employees. After one phone call to the IRS, this tax was reduced to the actual penalty we owed.

Nice, easy, simple and friendly.

I then made sure the "estimated tax" for the 1040's were accurate. Again, the big bad IRS man was helpful and friendly. A circumstance with my boss came up in the conversation and we were automatically given a tax advocate who in turn was able to lower even more of the taxes owed.

Once everything was nailed down, we began making payments. Fortunately, we were able to pay off the taxes, penalties and interest earlier than expected.

The big bad IRS man, if he exists, didn't ever speak to me. As long as you're working with them, showing them you intend to get it all sorted out, showing them you're not purposely trying to be a tax evader, you'll find that the IRS can be very easy to work with. They must keep the big bad IRS man under lock and key until he is needed.

Other tax agencies are a different story. One in particular...

Family Business

A family business can be a great idea. There are several success stories. Many families work very well together and are quite a team.

Then there are those families who would be better off staying away from each other. Unfortunately, as a small business owner with not a lot of money, you can't always afford the people you need. You have a choice of becoming an expert in every area of your business, or hiring someone to take care of the aspects you aren't skilled in.

If you choose to do it all yourself, you will be up against: knowing your product/service inside and out, sales, marketing, advertising, customer service, accounting, bookkeeping, payables, receivables, taxes (better not forget taxes, they won't forget out you!), payroll, employment procedures, safety procedures, insurance, licenses, security of your building/office, quoting, invoicing, collections, planning (including exit planning!), researching your best vendors, website development (if you want an online presence), website marketing (a bit different than offline marketing). I'm sure this not an exhaustive list. It also depends on what type of business you're in.

If you don't have the money to hire specialists in these areas, you may end up hiring family. If you belong to a family that doesn't display a team attitude, you may be in trouble. If you hire someone who isn't a specialist or accredited in the field you hire them for, they may (usually) end up taking a lot longer to figure things out! This is not very efficient, but it's what we are stuck with.

I am not an expert in business. My specialty lies in software development, and that is not a specialty needed for this current job! The first month on this job was spent reconciling every account we had. It was a bit of a nightmare. I couldn't understand why certain items were not reconciling... and they weren't even close.

Voided checks in the register had been cashed. Checks had been made out for a different amount on paper compared to the Quickbooks register. And the recipient of every questionable check was the same person.

Beware of family! A family member had embezzled several thousand dollars over a period of about 3 years. The check stubs were marked void when the checks were cashed. Some check stubs only showed half the amount of the actual cashed check. Maybe this is why the accounts had not been reconciled for 3 years?

There were other financial improprieties as well. It's a wonder this business survived.

Beware of family.

The Ends Don't Meet

Offering terms of payment is fairly common in business. Many vendors offer a 30-day net, some offer 10 day net, and another few allow a bit of a discount if we pay early. This is fairly typical.

I do not get the option to tell my vendors when I will pay. The vendors have the right to tell me as their customer what they will allow.

As a consumer, you do not get to tell a retail store that you will pay them differently than what they expect. You don't get an opportunity to tell your lender that your loan payment will only be made quarterly. And you certainly don't have the option to tell you car dealer that you will be driving the car off the lot, but financing will be completed after 90 days.

As a small business, we experience situations that become a bit stretched out. We have customers who completely ignore the due date on invoices because they have their own payment terms of 45, 60, 90 and sometimes 120 days. We have a customer who only pays quarterly. We have experienced customers who take a discount even when they are 60 or more days overdue.

Consider this scenario: A customer asks us to do a job on the 1st of October. I order material and we get started on the job that afternoon (the material invoice will be due Oct 31). The job is completed and invoiced on Oct 7. Our customer isn't expected to pay us until Nov 6 (there is already a gap between payable and receivable). On Nov 7, I call the customer to see where the payment may be in their system. This is when I'm told about their payment terms, or that they pay quarterly and we missed the deadline for invoicing (in other words they didn't ask for us to do the job until it was passed their deadline). Quarterly payments will be made Dec 15 so we can't expect a check until late December.

I decided to test this theory a few months ago and called an unknown vendor for material. After placing the order, I told them I would be paying in 90 days. It's the new payment terms for our company. My company has a AAA credit rating and great references, but it didn't seem to matter. After a little conversation with the Accounts Receivable people, the order was canceled. They decided to be offended that the customer would tell them the payment terms they would accept.

So now I know I have the right to be offended by the customers who do this to us. Our customers who pay in 45 or 60 days now have an up-charge on each of their invoices. The customers who would normally pay in 90 to 120 days and the one who pays quarterly are now cash only. The customers who take the discount even when they pay very late have a double up-charge.

The small companies and/or sole-proprietors are not guilty of this financial insanity. It is invariably the large over-stuffed companies who are too big for their breeches. It is the monstrous companies with suffocating red tape who do this. It is the companies who number their employees instead of naming them.

In my experience the little guys never expect special treatment. They treat business like business. They treat everyone with a friendly-professional manner. Maybe the difference is that the big dogs forgot where they came from.

If you're thinking of starting a business, consider what may happen to your budget if you're expected to pay bills for several months while not getting paid for your work. Some of our neighboring businesses suffer through complete non-payment, to the point where it must become a write-off. Fortunately, in my experience, this has only happened once with a very small invoice. (knock on wood)