Equipment: Lease versus Purchase

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Let’s put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the
arrangement, until one day, the owner threw them a curve. “Since you
are all such good customers,” he said, “I’m going to reduce the cost
of your daily beer by $20.”Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so
the first four men were unaffected. They would still drink for free.
But what about the other six men – the paying customers? How could
they divide the $20 windfall so that everyone would get his ‘fair
share?’

They realized that $20 divided by six is $3.33. But if they subtracted
that from everybody’s share, then the fifth man and the sixth man
would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s
bill by roughly the same amount, and he proceeded to work out the
amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings)

The sixth now paid $2 instead of $3 (33%savings).

The seventh now pay $5 instead of $7 (28%savings).

The eighth now paid $9 instead of $12 (25% savings).

The ninth now paid $14 instead of $18 (22% savings).

The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four
continued to drink for free. But once outside the restaurant, the men
began to compare their savings.

“I only got a dollar out of the $20,”declared the sixth man. He
pointed to the tenth man,” but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I!”

“That’s true!!” shouted the seventh man. “Why should he get $10 back
when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get
anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine
sat down and had beers without him. But when it came time to pay the
bill, they discovered something important. They didn’t have enough
money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how
our tax system works. The people who pay the highest taxes get the
most benefit from a tax reduction. Tax them too much, attack them for
being wealthy, and they just may not show up anymore. In fact, they
might start drinking overseas where the atmosphere is somewhat
friendlier.

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

An excerpt from:  David R. Kamerschen, Ph.D. Professor of Economics University of Georgia

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Employee Feedback: Listen and Learn

Employers have come to realise that one of the best things they can do for their business is to get feedback from their own people.  While listening to customers’ suggestions and complaints is important, soliciting the input and ideas of employees can be priceless. 

What You Learn from Listening 

Your employees are your “contact people” as they are the ones who directly deal and interact with your customers.  If your employees are dissatisfied with their working conditions, they are unlikely to pass on a good vibe to your customers.  They cannot serve with a smile if they have nothing to smile about.

When employees are dissatisfied, moreover, they will not stay long.  Employee turnover rates would be high and this can not be good for your people’s morale – why be friends with your office mates when you or they’d be gone soon, anyway?  With high turnover rates, moreover, you’d be forced to devote a lot of time (and company resources) on hiring and training new employees so you’ll have little or no time to growing your business.  You’d be dealing with the employee learning curve again and again.  Inexperienced employees also means more mistakes.

Employees, moreover, are not machines.  When they work, they think and they usually have an opinion about the way things are being handled, the company policies and how the business operates.  Your employees are therefore good sources of ideas for your business’ overall improvement.

Imagine, then, what mere listening to employees can do and give you.  If you listen to your employees, you will LEARN a lot of things.  You will learn what your employees think about the way you run the business, what company policies are hindering your company’s growth and what needs improving on your product or service.  If you listen to your employees, you will know what pleases and bothers them so you can introduce programs that will improve your employees’ satisfaction with their jobs.  By so doing, you will retain more of your employees.  This, in turn, means better and more experienced employees dealing with customers (this means greater customer satisfaction), satisfied and happy employees (motivated employees who have the good of the company in mind) and less time/effort/money wasted on training new hires (efficient use of company resources).

Overall, if your listen to your employees, your company can improve for the better.

Listening to Your Employees 

How do you listen to employees?  There are many ways.

Survey:  You can do an employee survey; you can formulate a questionnaire and distribute it to your employees.  To make sure you’re capturing the information that you need, you can ask professional researchers to make the questionnaire for you.

Meeting:  You can also set a meeting with your employees and directly ask them what for their feedback.  You must be careful here; you don’t want to offend people by shooting down their ideas just because you personally think such ideas have no merit.  During the meeting, just listen and take down notes.  Then, you can analyse the information you have gleaned on your own.

Discussions:  You can meet with each of your employees for a more in-depth and personal discussion.  This will give you the privacy that you need so you can get useful suggestions without being wary of embarrassing your employees.

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Firing employees: The right way and the wrong way

It’s very common nowadays for managers to resort to extreme measures such as firing employees just so the business or company can stay afloat.  Then there is the other, more common reason for firing an employee.  That is, when an employee has become a non-performing asset, a liability so to speak, he or she is usually fired.  One other reason for firing employees is the “greater good”.  This usually applies when an employee, through their own behaviour and attitude, disrupts the peace of the entire company.  Whatever the underlying reason, however, firing an employee is never an easy task.

The right way

You must remember that there is a proper way of letting go of an employee.  If you choose this path, you will avoid creating an enemy and perhaps even save your company from a costly legal battle.

1.  You must have the right reasons.  Why are you really letting your employee go?  If you are firing your employee because of their dismal performance, that’s understandable.  If you are letting them go because it is crucial that your company be downsized or because the employee has behavioural problems, that’s unfortunate yet still understandable.  However, if you are letting personalities – particularly the clash of theirs and yours – colour your decision, then you must think again.

2.  You must follow common courtesy.  You must sit the person down in your office and talk to them privately.  It is even more important that he or she hear it from you first.  Moreover, do not let other employees know about the dismissal before the involved employee knows about it.  Inform your employee about your decision as soon as it has been made so that they can prepare for the inevitable.

3.  You must follow standard operating procedures.  You must be careful to keep the matter legal.  Before you proceed with the dismissal, review your company policies that concern firing employees.  You must follow the details of your employee’s employment contract to the letter.  If a month’s notice is necessary, you should abide by that.  Furthermore, it is required that you file a written report of the dismissal, let the employee read and sign it, then file it for record purposes.  The employee must also be fully appraised of the reason for their dismissal and you must listen to what they want to say as well as answer their questions, if there are any.

4.  You should be civil and professional.  It is important to remember that while the interview cannot be really pleasant (you are firing an employee, for goodness’ sakes), it can still be civil.  Thus, you should be professional.  Do not scold the employee and go through their transgressions; proceed in a matter-of-fact manner, instead.  It would be even better if you can be empathetic; just never be antagonistic.

The wrong way

Doing anything that violates the above is to fire an employee the wrong way.  Personal reasons, gender discrimination and avoidance of workers’ compensation (firing injured employees) should not be reason for firing an employee.  Moreover, never treat the matter unprofessionally; telling all others before the employee concerned, engaging in rumour mongering and callousness on your part encourage bad feelings.  All these can leave your company vulnerable to litigation.

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Storefront: Does you store persona say “come in” or “get lost”?

It goes without saying that an effective storefront calls out to potential customers and invites them to look at the merchandise.  No matter how great your items are, if your storefront doesn’t attract passers-by, you will have a hard time encouraging walk-in customers who actually contribute a large part of your sales income.

Have you ever looked at a boring signage that looked completely out of place in front of a store and never gave it a second thought?  That’s how important a good storefront is.  It is not something you put up without careful thought and it is not something that you can just display your name on.

Designing an Effective Storefront

When considering the design of your storefront, you have to take note of the following:

1. Branding – Your logo should be designed in such a way that people will immediately have an idea of what you are about.  For instance, a candy store should naturally have a logo that has a touch of something associated with sweets or sugar or something to this effect.  You get the picture.

2. Window display – Your window display should support your branding.  Let’s go back to the candy store.  Think about children since they are mostly your target market when conceptualising your window display.

3. Concrete theme – Consider the look of your logo/branding and your concept of the window display.  These two should be in sync when put together.  Consider the font of your letters, the logo itself, the colours, and the over-all look of the store.  Everything should work together to convey your marketing message.

4. Materials – These are important too because they contribute a great deal to the coming together of your theme.  No matter what materials and tools you choose, you must be able to successfully incorporate these into your theme.

5. Size – You don’t want something so small it can’t be seen by anyone who’s just a few feet away from the store.  It can be as big and bold as you want for as long as you don’t ruin the look of the store.  In fact, some fun stores will have you walk right through doors or entrances that are part of the theme such as the front part of a car or a pirate’s ship.  These are already calling out to customers.

Get Professional Help

The good news is that you don’t have to go it alone.  Your great ideas can be turned into something more tangible by professional graphic and design artists.  They can help you with the concept as well as design you a powerful logo (taking into account everything you want to incorporate) and then some.

If you don’t know where to look, the internet can help locate some good artists that can design your storefront for you.  Choose those that have portfolios so you’ll have a good idea of how they work and what they’ve done.  The only important thing to remember is that your storefront should attract customers and not shun them away.

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10 Reasons to Buy an Existing Business

Starting on the path of business is hard and choosing the specific path is even harder.  Nevertheless, no matter what path you choose, there will always be risks that you’ll have to take when starting a business.  Going into business, though, doesn’t always have to be a leap of faith.  Although there will always be an element of risk involved, you can considerably lessen the risks by buying an existing business.

1. Facts vs. theories:  You will have a great deal more facts to work with.  Some of these facts are the average revenue per month, the inventory turnover, the number of new customers, average profit per month, etc.  More facts mean fewer theories and less guesswork.

2. Existing system vs. experience:  With an existing business, all you have to do is to improve on the systems and infrastructure that are already in place.  If these were working right before you bought it, then there will be less chance of making the expensive start-up mistakes that entrepreneurs always charge to experience.

3. Shorter ROI time:  Typically, ROI timeframe is shorter.  You don’t have to spend as much time building the business; operations can commence the day after you sign the papers.  You do away with the development stage and go right to the production stage.

4. New vs. second-hand:  Most (if not all) of the equipment, furniture and other assets are second-hand.  This represents considerable negotiating leverage when it comes to the business selling price.  Second-hand assets are always cheaper than new ones although they are not always inferior in quality.

5. Existing customers:  When buying an existing business, you get the business’ existing customers as well.  This means you don’t have to go through nerve wracking months of hoping for customers to stumble in.

6. Experienced employees:  You also get the business’ experienced employees.  This means less training costs, fewer mistakes and fewer aspirins on your part.  But then of course, the task of breaking bad habits falls upon you as well.

7. Better financing options:  When you buy a business that is at least two years old or more, you also get to buy the financial options that come with the track record.  Banks are ‘friendlier’ to businesses that have been up and running for at least two years.  This gives you the option to take out a loan to augment the business capability or to upgrade the operations.

8. Known vs. unknown:  An existing business would also have (for good or bad) an established place and identity in the market.  This means that you don’t have to fight hard for a place in your target niche.

9. Having a mentor plus flexibility:  When you buy an existing business, you also get a mentor (the seller) who can help you learn the business thoroughly.  This is almost as good as going into business as a franchisee.  Unlike a franchisee though, you will have more options, more flexibility and total control when it comes to making crucial decisions about your business.

10. Less risk:  From all of the above reasons, buying an existing business means less risk.  Of course, this also depends upon the care you have taken to make sure that you have chosen the right business to buy.  Good luck and good hunting!

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Top 5 warning signs that your business is declining

The hardest thing to admit for a business owner is the fact that their business is slowly dying.  After all, what business owner would want to admit that their once future hope of building an empire is forever to remain in the realm of wishful thinking?  Thus, the owner of a failing business continues to hold on and on until their knuckles turn white and face becomes so blue from holding their breath.

Before this happens to you, look out for warning signs that impending death to the business could be lurking just around the corner.  This way, you can still do something and not give up without a fight.

Tell-Tale Signs that Your Business Could Be in Trouble

1.  Exodus.  Your employees are doing an exodus a la Moses towards the promised land of another company.  You just can’t seem to hold on to them any longer although not much has changed with the way you’ve been regarding them from Day 1.  Perhaps herein lay their issues – that there is no growth in your company.  You are perhaps the reason why they’ve become stagnant.

Do an exit interview and find out why your employees are leaving.  From what you learn, you can improve your employee relations and perhaps keep the new ones or prevent the rest from leaving as well.

2.  Paying off debtors has become hard.  Although the original idea was to borrow more so you can meet your other payments and perhaps turn things around, you ended-up having more debt than assets.  Now, you find yourself asking your secretary to keep debtors’ calls at bay and you have fallen into the nasty habit of giving post-dated cheques way after your due date.

At this point, talk to your accountant (if you have one) or a financial consultant.  Find out what your assets and liabilities are, and explore your options for paying off your debts once and for all.  Find out, too, how you can prevent yourself from getting deeper in debt.

3.  Your loyal clients are jumping ship.  Suddenly, regular customers are no longer visiting your store or returning for more.  Find out why.  Are your customers deserting you because your service has deteriorated?  Are your customers leaving because of quality or price problems?

Find out why your customers have stopped buying your products or using your services.  After you have done so, look for the underlying reasons.  Has your service deteriorated because of staff morale problems or lack of manpower?  Has quality deteriorated because of carelessness?  Has your competitor cut prices?  Solve the root problems that you uncover.

4.  You offer your products and services at below profitable prices just to keep your clients or get new ones.  It doesn’t help to lower your price drastically just to be able to keep your business afloat.   In the long run, you will still end up losing your business.

5.  You feel more tired, pressured and unfulfilled than in all the years that you’ve been running the business.  While it’s natural to feel these from time to time, it becomes another matter entirely when you start feeling like this everyday due to your business worries.  If you’re not happy anymore, perhaps it’s time to swallow the bitter pill and admit that it’s time to fold-up and move on.

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5 Tips for picking the best business partner

The success behind any business lies mainly on three things:  your product or service, its affordability and you (or the people) who run it.  Make just one of these components mediocre and your business and everything for which you’ve worked hard will go down the drain.

Therefore, once you have an excellent product or service idea, done your research on the market and have come up with a consumer-friendly price for your product or service, the next thing you need to do is to look for a business partner.  While going at it alone could be a better choice, it isn’t always the best because a partner could actually help you achieve your vision – IF you have the right one, of course.

Choosing a Business Partner

1.  Specify what you need in your business partner/s.  First of all, list down your strengths – your skills, talents and capabilities – or what you can bring to the business.  If you are thinking of putting up a graphic design and web development business for instance and you already are a good graphic artist with years of experience, there really is no point in getting another artist as your partner.  In this case, your partners (you’d probably be looking for more than one) should be someone who is an excellent marketing strategist and someone who is an excellent website programmer.  You’ll need the programmer for web development and the marketing strategist for selling your services to the market.

2.  Be strict about your business partner’s qualifications.  Remember that you want your business to become profitable – and unless your partner or partners can deliver their end of the deal, your business will never take off or will not last for very long.

It might be easier to choose your friends or relatives who know a little something about the business you want to put up or have a moderate proficiency for the tasks that your business partner will be expected to perform.  However, a partner who knows “a little something” is not someone you’d want to begin your business with.  Choose only people who can do an excellent job, whether they are your friends or not.

3.  Check his/her credentials.  When presented with a potential business partner, you should not take him/her at face value.  You should research his/her background and track record.  You need someone with loads of experience so he/she should have a portfolio bursting (or near bursting) at the seams with past work samples, references/testimonials and other proof of skill/talent/capability.

4.  Designate.  After deciding on your business partner/s, you should list down the tasks that need doing in your business.  After specifying the tasks, you should assign these tasks accordingly.  You know what you can and can’t do, and you know why you picked your partner/s; thus, task designation should be easy.  Make sure that task assignments are clearly understood by everyone involved.

5.  Make everything legal.  You should draw up a contract that lays down – in black and white – the details of the partnership.  The contract should be quite specific on what is expected of each partner (including you).  There should be sections on each partner’s obligations and responsibilities, share of capital, profit share, dispute resolution, and partnership dissolution.  Have a lawyer draw up the contract for utmost detail and protection.

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You can’t send a duck to eagle school

For any small business owners out there who need a little inspiration when recruiting the right calibre of staff, this short movie may help you.

http://www.eagleschoolmovie.com/

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10 things to do BEFORE you start your business

From the start of your business, you’re in a race against time.  Your hard earned money will essentially become like the sands of time, trickling down into a void of nothingness from which your business must rise above within a short period of time.  To help you cope for the initial race with time, here are ten things that you must do before you start your business:

Assess yourself:  Know if you have the qualities – discipline, knowledge, drive, and skills – that are needed to see your business venture through.  Are you willing to go through months of financial insecurity and fear?  Knowing yourself is winning half the battle to come.

Assess your business idea:  It’s one thing to be convinced that your product or service is better than what is currently offered in the market, but it’s entirely a different matter trying to convince other people to believe the same.  Test the waters; get an idea of how other people will respond to your products or services by talking to them first.

Assess your market:  All businesses are based on the relationship between buyer and seller.  Plunging in without getting to know your intended customers spells doom for your plans right from the start; this will lead to expensive marketing (and budgeting) mistakes and hamper your plans and strategies for getting your investment back.  Get to know your target market; know their buying power, their spending habits, their preferences and tastes and the world will be yours.

Assess your budget:  Many start-up businesses close down after a few months due to the lack of a robust cash flow.  In fact, no matter how good your business idea is and no matter how many customers you have, if you don’t a solid financial plan, there will be no way for you to go but down.

Assess your marketing and advertising plan:  Marketing and advertising will be some of your most expensive tasks during your first few months in business.  It goes without saying that you must make every cent count.  Carefully plan what marketing and advertising methods you will be using.

Assess your competition:  Knowing the competition is a big factor in maximising your chances of becoming successful.  Get to know your competitor’s pricing, marketing and other strategies so you can compete.

Assess your people:  Check whether or not your people are assets or liabilities to your company.  Train and retrain them if necessary.

Check your premises:  Now will be the best time to check your premises or the assumptions that underlie your decisions.  If, for instance, you have decided to under-price the competition so you could get into the market, you have to ask yourself whether or not your assumption that price is one of the significant determinants of your target market’s behaviour is correct.  This step is necessary so you can correct plans based on incorrect assumptions.

Put all your plans down in writing:  This way, you’ll have a blueprint of your plans.  Your business plan will serve as your guide and your compass during the months to come.

Make sure you have all the necessary papers and permits:  Doing this ensures that you will avoid future problems; it also increases your credibility with your customers.

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