Monthly Archives: November 2009

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Mind Your Budget

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As you brainstorm survival strategies for yourself and your business, creating a budget may be a good item for the to-do list.  A good budget can help you manage costs, understand where your profit centers are (and are not) and most of all,  let you know if you’re really making money and if so, how much.

For Freelancers, the temptation is to simply add up the 1099s at the end of a quarter or year and assume that tells the story. Yet there are always costs of doing business and it is very important that we know where, how and for what purpose we are spending our money.

Do you really need to rent office space?  Is it necessary for clients to visit your office, or might it be perfectly acceptable for you to go to them?  What is the ROI on the networking events that you attend?  Be strategic and selective about the rooms you pay to enter and go to events where you get the most bang for the bucks.

After you’ve been a few times and met a few people, try cutting back to bi-monthly or even quarterly appearances.  If you want to keep in touch with colleagues in between, invite them for a coffee.

Tally your gross revenues and cast a cold eye on expenses. These are the foundation of any budget for any business, or household for that matter.  Managing expenses has a huge impact on the bottom line.  It is possible to lose money overall even if sales are strong, because you either spent too much (money or time) to make the sale or overspent on other operating and production costs.

So if you make and sell jewelry, for example, watch how you buy the raw materials.   Do you have the best available sources?  Should you buy more and stockpile inventory in order to get a better price? Pay attention to market fluctuations and buy big when prices drop.   Managing the cost of goods sold adds to your profit margin.

On the expenses side, be sure to divide fixed expenses (rent, salaries, utilities, long term payment obligations, etc.) from variable expenses (sales commissions, advertising, travel, etc.).  Make note of seasonal fluctuations.  Does business slow down in July and August—or pick up? Identify where you can trim expenses or negotiate a better deal.

Once you’ve figured out the money coming in and money going out over the past 2 or 3 years and assessed where you are,  you can then decide what financial targets you’d like to reach.   Maybe you want a certain overall profit margin on goods sold, or perhaps you’d like to have average net quarterly earnings of a certain amount?

While you’re analyzing gross revenue,  you may even discover that spending a little money will make it possible for you to make much more.  For instance, hiring an assistant at $18/hour to answer the phone,  send invoices,  deposit checks,  post transactions into a ledger or help make jewelry in preparation for Christmas or Valentine’s Day can give you more time to network,  prospect,  make sales calls or double your output of jewelry available for sale.

Especially for Freelancers and other sole proprietors,  how you spend your time can be factored into the budgeting process.  Digging into your company finances may just turn up some buried treasure.

Happy Thanksgiving!

Kim

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Squeezed

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It is difficult to be in business these days.  Billable hours and revenue are down for most, especially for those who offer intangible services.  Unless a clear and visible link to a sale can be demonstrated, many decision makers are reluctant to sign a contract.

Sometimes that link to a  sale is  fantasy, especially when the transaction results in a tangible product.  This phenomenon may explain how videographers have been making so much money. The desperate and the naive seek to drive traffic to their websites in the hope that customers will spend some dollars.  Unfortunately, the video produced may not communicate the right message to target customers.  Furthermore, sticking a video onto the website is  often not the best  solution to the client outreach objective. Traffic to the website may actually increase—but will that expensive little film clip also increase revenue? Not if the message is wrong.

Paula Harris, owner and co–founder of WH Cornerstone Investments, says that one of the biggest mistakes that an entrepreneur can make is thinking that the phone will just ring when you spruce up your website.  She says it’s all about networking (source: Boston Business Journal Nov. 6-12, 2009).

On the other side, we’ve got the credit card companies squeezing us.  Need $10,000 from AmEx to finance a contract? Fuhgeddaboudit! Two or three years ago a reasonable account holder could call them up and request a credit line increase for a legitimate reason.  If you paid on time and your credit rating was decent, you could almost guarantee that increase, especially when a contract representing the pay-back money was involved.

Try making that call today (if you dare).  Not only will there be no credit line increase, but for good measure they’re liable to claw back a couple of thousand from the line you’ve got now! Oh, and let us not forget about the inflated interest rates.  I worry about small retailers who tried to purchase inventory for the all-important 4th quarter. What was that like this year?

The credit card companies and big banks—many of whom brazenly took our tax money in the form of bailouts—have turned around and are working overtime to kill our cash flow. With business down, we need to float expenses more than ever, just to pay the phone bill and eat! Big business has denied us our bailout.  As we all know, it takes money to make money and their actions are preventing small business people from making the money we need to survive.

As a result of these disturbing trends, both business and personal bankruptcies have increased nationally.   Cash flow is tragic.  Many have run out of options. Why has this been allowed to happen in the United States? How can we manage to hang on and ride out this awful storm that will last for God knows how long?

No one knows what to do exactly. There are defensive measures to take:  some may have an immediate benefit,  others that only in hindsight will the effects be revealed.  If you’re still in business and still  living in your house next year at this time, well then you did something right (or you got lucky).

I respectfully suggest a few defensive measures.  Increase your visibility through networking:  do some speaking, teaching, volunteering and attend selected business events,  so that good relationships can be made or renewed.  Whatever business you manage to  get is likely to come in through a referral source.  Remember also to make referrals and facilitate introductions for colleagues, when possible.

Refine and hone your elevator pitch and sales pitch repertoire.  Make sure that your verbal package contains the hooks that prospects and clients want to hear.  Prospecting will likewise be essential,  as you must identify all credible sales opportunities.

Negotiations  and compromises  are likely to be necessary and perhaps advantageous.  Consider offering discounts for invoices paid within 15 days.  Consider also trades and barters.  Make sure that you’re trading equivalents.

Short term employment or an under the radar type part time job (maybe in the evening) will ease your cash crunch.  If you can be certain that colleagues and clients will not encounter you,  particularly as you labor in a low wage gig for $12.00/hour,  this can  help to pay a bill or two each month.

Times of adversity demand a special resolve and resourcefulness.  I wish you good luck.

Thanks for reading,

Kim

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Business Certifications Part II

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Women owned businesses have grown at one and one half times the rate of all businesses  created in the US (1997-2002) and contribute nearly $2 trillion to the nation’s GDP.  One in 11 women are self-employed or business owners (source: Center for Women’s Business Research cited in The Boston Globe January 25, 2004).

Women are now outright or majority owners of 40% of all privately held businesses registered with the IRS, representing 10.1 million business entities (source: Center for Women’s Business Research 2008 report).

Nevertheless, a January 2008  CWBR report stated that women owned businesses receive less than 3.3% of federal contracts awarded.  Perhaps the following certification program will help the ladies  reach a few more paying customers?

WBENC

The Women’s Business Enterprise National Council is where we women go to get ours.  To be awarded a certificate as a Women’s Business Enterprise, the company must be at least 51% owned, operated and controlled by a woman (or group of women).

Evidently, the assumption is that women have money; the WBENC certification fee is about $350.00 (varies by location).  Certifications are for one year only,  so there is a yearly recert. process,  reportedly simpler than the maiden voyage.  Certification is handled by Regional Partner Organizations which seem to be SBA affiliated Women’s Business Centers (see wbenc.org).

As always, you’ll need to hand over business financial statements plus your tax returns (will somebody please tell me how surrendering your tax returns and your social security number got to be routine in this country? It is all too intrusive. Is there any wonder why  identity theft occurs? Every frigging body knows the intimate details of your life!).

WBENC claims not to evaluate the profitability and viability of a business. The objective is to know who owns and controls the company.  I do not understand how delving into your P & L and balance sheets will verify that information but hey, it’s their game.  It’s just that ownership issues are more accurately revealed on incorporation and LLC documents.  As for  sole proprietorships, they are a  one person shop.  If necessary, a gynecologist can verify the gender question!

Do businesses that are not making money, but are going for the certification as a strategy to bring in much needed clients, actually get certified? WBENC committee members side step that question (I asked). Once your documents are received,  the review committee will certify (or not) in 60–90 days.  Expect a site visit to your business.

On the plus side, WBENC is a widely accepted certification. Prime Contractors love it.  I don’t believe there are any revenue restrictions involved, so WBENC is not exclusively for small businesses.  Certificate holders must be US citizens or legal resident aliens.

CHECK OUT THE SBA

Regardless of your gender or ethnicity, a visit to sba.gov is worth your while,  if for no other reason than to find out what resources are available for free. The information is good and reliable. There are also special business development programs for Native Americans, those over 50 years, veterans, Spanish speakers and of course, small businesses in general. There is a place at the table for everyone, including white non-Hispanic males!

If you can visit a district office, check out the monthly calendar and see what workshops are offered.   If you’d like info about stimulus loans (what stimulus loans?), micro–lending and other local business initiatives, the SBA will point you in the right direction. Your tax dollars in motion!

More next week,
Kim

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Business Certifications Part I

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As you weigh strategies that could  help to better market your services,  you might happen upon  special category certifications.  In fact,  some large corporations are less willing to do business with small business vendors unless a particular certification is in hand.

If a Fortune 1000 company has government contracts,  it is necessary to demonstrate that business is being done with small businesses, women owned businesses and minority owned businesses.  Hence, these companies need a certain percentage of  their small business vendors to  have a certification in one of these categories.  The Fortune 1000s can then report to the feds that they are in compliance.

HUB ZONES

If your physical business address lies within an historically underutilized business (HUB) zone, then your business may qualify for set-asides in the contract bidding process.  In general, HUB zones are disadvantaged areas in urban, suburban and rural locales.  To find out if you can apply,  go to sba.gov, click on services,  then opportunity gaps and  HUB zone.  Type in your business address.  If  in a HUB zone,  you can apply on line—but first  ask the SBA how to get the log in password.  Be prepared for a site visit at your business location by someone from the SBA about 2-3 months after you apply.  It may also be necessary to hand over certain financial records.  There is no fee.

8a CERTIFICATION

To obtain 8a certification,  it is necessary to officially state that you are disadvantaged economically because of your race or ethnicity.  The application process is a bear.  Start by calling up Dun & Bradstreet and obtaining a DUNS number.  Next, look up your business specialty codes,  sign up and create a business profile on the federal Central Contractor Registration  ccr.gov.  Then you can do the online 8a application.

At sba.gov, click on services, opportunity gaps and 8a to find good basic info that will get you started.  Furthermore,  SBA offers free workshops nearly every month at its district offices on what one needs to know about doing business with the government and special certifications.  Preparing to do business with the feds is a  Byzantine process, but government agencies will pay in 30 days and thus will not wreck your  fragile cash flow.

In the application there will be much supporting data to supply and there are restrictions.   As always, they want your tax returns, 2 years in this case. You must  have been in business for minimum two years,  you cannot have more than $250,000 in assets, you cannot be employed full time in a job outside of your business and your credit has to be good enough to finance a contract.  There is no application fee.

It’s a royal pain to get this certification and of course there is no guarantee that your efforts will yield any business.  You must still sell yourself to prospective clients.  SBA Small Business Development Centers  have on staff a Procurement Specialist who will speak with you about useful strategies to promote your business and win contracts.  It’s all about  relationship building and it takes time.

However,  the  Fortune 1000s  with the government contracts, called Prime Contractors,  like the 8a certification.  They have forms to fill out, boxes to check.   Ask  SBA who the primes are in your locale,  speak with the local procurement specialist and try to meet people.  There are trade shows to pay for and attend so you can make contact.  Also, visit fbo.gov and view available contracts.

Next week,  the spotlight will  be on the ladies.

Kim