Utilizing an Advisory Board to Guide Your Business

By Mike Semanco, President, Hennessey Capital

The importance of an advisory board to an entrepreneur and business owner is invaluable.  Entrepreneurs thrive on developing ideas, products and strategies on their own terms and at their own pace.  The “charge ahead”, “get it done” mentality is second nature to this group of individuals.  Entrepreneurs come in many shapes and sizes- sole practitioner, division managers or even CEO.   Whatever the title or responsibility, surrounding yourself with a group of professionals you can rely on for sound advice and direction will only improve your chances of success and keep you sane.

An advisory board is different than a board of directors or managers, who hold fiduciary responsibilities of the business.  Advisory boards can take many forms ranging from formal CEO roundtables and annual retreats to informal gatherings over coffee, lunch, or golf.  Having a sounding board to share ideas and challenges help entrepreneurs feel they are not tackling the world alone.  You can have a great internal management team or partner but there are times when outside influence is needed.  A different perspective from a trusted advisor who has encountered the same issue helps you see the challenge or opportunity in a new light.

Advisory board members can consist of professional advisors (your CPA, attorney, banker or consultant), friends or associates who may or may not own their own business, or even a current staff member.  The key is to surround yourself with people who have diverse backgrounds, are willing to challenge the status quo and who you like to be around. Start by selecting two or three contacts you feel could be strategic to your business and can fill the gaps you determine are needed.  Meet with them and discuss your plans and ask them of their interest to meet on a regular basis.  This could be once a month, quarterly or as needed depending on how critical your needs. 

Daily business decisions are not easy so having a group you can turn to for renewed perspectives and friendly banter is refreshing.

PO Financing- the ideal financing tool for the right situation

By Mike Semanco, President, Hennessey Capital

For many entrepreneurs, landing that large purchase order is just what the doctor ordered.  You worked hard to win the client, outlasted the competition and are in a position to build on your success.   The team celebrates until someone asks, “Do we have the cash to purchase the large amount of supplies needed to deliver the project?” 

Growth can be a major drain on a company’s cash and a major reason why we stress the importance of cash forecasting. 

Although purchase orders are covered in the Uniform Commercial Code as an asset of a business, it is not an asset that is easily financed, unlike accounts receivable, inventory, equipment or real estate.

Purchase order financing is offered by very few finance companies and is usually best suited for distributors.  Manufacturers and service providers are not ideal candidates for PO financing due to the concern of performance risk.  PO Financing for distributors allows for the securing of goods by way of letter of credit (promise to pay once certain stipulations are met), so that the distributor can increase its buying power with suppliers.   In the case of a distributor, they are not responsible for manufacturing the product so performance risk lies with the supplier.  PO financing will be structured so that the supplier will not receive payment unless they produce the proper product as defined in the PO, which eliminates the issue of performance risk and thus satisfies the PO funding source.

PO financing carries more risk to a lender than traditional A/R financing thus the cost is more than traditional A/R financing.  Due to the increased cost, companies must make sure they have sufficient margin in the order.  PO financing is typically used in conjunction with an A/R line of credit or factoring facility so that once the product is received by the end user, invoices can be financed and the cash can be used to repay the PO funding source.  This opens up the PO finance facility to be used for new orders. 

Purchase order financing is not ideal for every business but in the case of a distribution model where product needs to be purchased and sold to large entities or retailers, it could be a great tool to secure the cash needed for new growth.

10 Tips for Selecting the Right Factor

When entrepreneurs need working capital for their business, a quick way to obtain cash is by leveraging your accounts receivable. Factoring companies are a great source for this type of financing. Although factoring is a pretty vanilla process, the company providing the factoring can come in many flavors. A referral from a trusted source, banker, CPA or attorney, is a good start to finding the right company. 

 

Below is a checklist of things to consider when seeking a factoring partner.                                 

1. Relationship, partnership- easy to work with, straightforward process, easily accessible.
2. Do they have capital to lend or is their credit constrained?
3. Do they have resources that can complement their financing if needed- leasing, real estate lenders, consultants, etc? It’s important to be connected to other resources and entities that can help grow your business.
4. Factoring should be flexible, so watch for monthly minimums.
5. Fully understand your costs.  Ask about exit fees, service fees and documentation fees.
6. Local flavor and relationship.  Not always a necessity especially if references check out.
7. Industry expertise beyond factoring.
8. Ability to transition from factoring to line of credit without switching entities.
9. Relationships with banks are key for future introductions.
10. Community relationship.  Are they making a difference in your area?

Creating Strategic Partnerships to Build Your Business

By Joe Romeo, Senior Business Development Rep., Hennessey Capital

 

Creating partnerships can help build your business and connect you to new people and markets. The right strategic alliances can strengthen the breadth of your company through association with other related industry specialists.

 

This brands your company as more well-rounded to your client base and builds deeper bonds and support from your business partners while growing stronger inter-relationships.  These bonds can last for years, paying dividends along the way.

 

Often these partnerships become valuable referral connections for your existing clients and result in the most valuable return you can get from any client as you help them in “other areas” outside the scope of your expertise. Customers recognize and appreciate your assistance has no direct self-serving interest.

 

To get started, it’s important to find partner companies that operate in your prospects’ circle.  There are two essential components for your best alliance partnerships:  the actual companies and the individuals representing those companies.

 

The right company is any non-competing company that is well respected and interacts with key decision-makers, influencers, and your prospect customers.   It is particularly beneficial to reach out to  trusted advisors, including bankers, CPAs, lawyers and business consultants whom your prospects look to for guidance.

 

Other good candidates might be third party connections like state, local and federal agencies or associations who help businesses find the resources they need.

 

The best fit for any business will be a partner with similar values and like cultures.  The business can be at the opposite end of the product or service spectrum, but should operate with the same primary principles to yield the quickest results and easiest collaborations.

 

Equally important is the right ambassador, who should be a “rain-maker,” not a resource waster.  The individual should be an effective executive who works on the right things, is efficient, capable and “connected.” 

 

Approach:  Work to develop relationships in a complementary, collaborative manner.  This requires that you put the partner’s interests ahead of your own.  A valuable adage is “you can best get what you need by giving others what they want.”

 

In this stage, seek to understand the partner’s business and learn where they fit in/complement to your company. It is also critical to be cognizant of their key objectives. This will add value to your relationship and lead to a mutually beneficial partnership.

 

Keep in mind that everyone’s favorite station is WII-FM (What’s In It For Me) and build your approach accordingly. 

 

Team with partners in joint presentations, white papers, event exhibits or other such marketing channels to maximize your exposure and partnership opportunities. Your affiliation with key companies will increase your own company’s visibility and help you gain traction and the benefits of associating with recognized, expert partners.  This will lead to great network connections and the ROI will be measurable.  

 

BENEFIT:

Some of your partners will turn into future clients or you may need their services some day and enjoy the preferred customer treatment.

 

More traditional returns include the warm introductions you will get as your alliance partners act as trusted advisors for their clients and you are favored with the pole position as the result.

 

The ability to share ideas and get a diverse viewpoint or opinion can be an extremely valuable benefit from your strategic partners.  If you look at CEO business coaching you will see that they purposely intermix CEOs from different businesses for this very benefit.  Often a creative perspective or the view from some distant, unrelated business field will lead to a different outcome. 

 

Invest loyally with partners  before you look to make any withdrawals. This is an ongoing process, not a one-time commitment. Maintain your investment and stay on your partner’s radar. 

 

A useful resource is www.networlding.com and Melissa Giovagnoli

 

Branding/Rebranding Your Business

By Mark S. Lee, President. Lee Group, MI LLC

What will it cost you and your company if you don’t consistently communicate your value and brand?

The concept of branding has been trendy for a long time. With all the buzz, it’s important to understand exactly what this means to you, your company and everybody your company “touches.” Many people associate a brand with a logo, tagline, colors, and web design. While that’s part of your brand image, it’s clearly not the whole story. A brand represents the impression that you leave with customers, prospects and business partners. It infiltrates every contact point and requires every employee who influences stakeholders’ perceptions to be fully engaged and committed to delivering on your brand promise.

Are you confident that you’re communicating your value and therefore, your brand, effectively to your customers and prospects? Much of business failure can be traced to the way companies communicate - or fail to communicate – effectively with their stakeholders, including customers, prospects, partners, employees and anybody else who has an interest in your business. Whether you’re planning a new business, have just launched it, or have been running it for a while, it’s critical to avoid the most common pitfalls companies make communicating their value, brand and solution. In this article, we discuss branding as a tool and provide tips for you to brand your company as well as why you should consider branding yourself.

Consistently Communicate Your Brand.

Every company and individual has a brand (this isn’t just for the 100 pound gorillas of the business world). Do you know your company’s brand? This is the message that you are communicating on a regular basis to customers and prospects…it’s the impression you leave with every customer and potential customer…..even if it’s not the statement that you want to make. Your brand is communicated through every customer touchpoint - from phone to the internet and via email, direct mail, advertising and every other opportunity you have to reach out to your target market(s). Your brand is communicated by every employee in your firm from the CEO and sales team right down to your department directors and shop floor managers. Your brand is what sets you apart from others in your industry and makes you unique.

A brand can only succeed and achieve its goal of supporting growth if it satisfies three key criteria. If any of these factors fail, you risk major malfunctions to your business and bottom line:

1. Leaves a positive impression
2. Is aligned with your customers‟ needs and
3. Is delivered consistently, as promised.

Why Do People Buy A ‘Brand’ Any Way?

There are many reasons for buying a brand including the fact that the brand identity:

• Fulfills a short or long term need
• Has an emotional connection
• Has a perceived Price/Quality relationship
• Is “hot”—meaning the brand is en vogue
• Represents who you are or want to be aligned with

Let’s look at an example of how a brand has succeeded in achieving these goals. FedEx is a world leader in package delivery. Their brand and philosophy are simple—when it absolutely has to there overnight, FedEx will do it. Every employee knows and understands this. But beyond understanding this, they believe in the brand mission and understand their role in making this happen. Every employee, regardless of their position, knows the brand‟s philosophy and works to deliver on its promise. This is the only way a company can live its brand.

There are several questions you need to ask yourself to ensure you’re delivering a brand value that will generate profit, including:

1. Is the message you are conveying consistent?
2. Is this the message you want to be heard and experienced?
3. Do your customers understand how you differentiate yourself from like organizations?
4. Do they experience your brand in the manner that you want them to?
5.  Does reality align with your promise?
6. Finally, is your brand what your customers seek and truly value the most?

Components of a Successful Brand

In the past, companies would develop a product and then promote it. As a global economy, businesses continue to evolve and become more dynamic and competitive. Organizations must redefine their value and sometimes their business model in order to succeed. This redefining leads to the creation or reinvention of their brand

How do you create a unique brand? This must begin with the development of a baseline to understand your strengths/weaknesses as well as opportunities/challenges in the market place. It requires an open mindset if you‟re branding your company.  Ask the following questions:

• What is the unique valuemy company offers?
• How do others perceive this, now?
• Does this perception need to change?
• Why would I purchase my company‟s brand?

Next, you must evaluate your company‟s brand to ensure the following components exist:

• Vision: Where do I see my company going? What is my ultimate direction?
• Positioning statement: How will it be positioned in the marketplace?
• Value Proposition: What makes my company unique? What service or need does my company fulfill?
• Competitive Advantage: What makes it unique from the competition? Are I just- as-good or better than the competition?
• Leveraged Strengths: Based on an internal assessment, do we really understand our strengths and weaknesses? If so, how can I leverage these strengths?
• Communication Plan: What and how do I communicate our plan to others? What is my communication strategy?

We finish by sharing key strategies that will help you create and reinforce your company brand:

1. Focus on the Needs of Your Target Market: Understanding your target market will allow you to develop a brand position. As a business owner, how confident are you that you truly know what your customers need, want or expect from your company? Many business decisions are based on a gut instinct of what you believe customers want and not necessarily because you asked them directly. You must ask existing customers as well as former and potential customers to ensure their concerns and expectations align with the value you provide. This will translate into your brand position.
2. Recognize And Act When Outside Factors Impact Your Brand Perception. Customers do not reside in an isolated world. Recognize how external factors (i.e., recession or
   Business Owner‟s Guide to Rebranding Page 4 of 5
   varying industry regulations) might impact their decisions and their ability and interest in conducting business with you. If you recognize these and address them this will strengthen customer loyalty. Many businesses in the recession have lowered their prices to address customer challenges. As long as they did not forgo their customer value, this makes a solid impression upon customers who will stick around long after the recession has passed.
3. Carefully Review All Communication. Is your message consistent in all of your communication? This includes everything from written documents, presentations, advertising, your website, brochures and direct mail to email, sales presentations, phone calls, etc… Every employee must communicate the same brand value at every level of the organization. One employee who isn‟t consistent with delivering your value can truly cause harm to your image and your bottom line.
4. Develop a Solid Elevator Pitch: Given that an adult’s attention span is 15-30 seconds, do you have a pitch that highlights your brand in that short window? What are the key points you need to convey about the VALUE you provide (not necessarily the products and services)? It’s critical that your pitch is concise, AND compelling. The pitch objective is simple–to develop a message that ensures the other person wants to continue the dialogue.
5. Present your Company Passionately. This is your business-your baby, in many ways. Therefore, it‟s personal but you must be able to step outside of the company and honestly ask yourself, “Why would I do business with me?” It‟s a simple question, but the answer may not be so easy to address. Once you‟ve identified the answer, make sure you convey this in words as well as in your body language. A sincere passion for the value you provide will go a long way in business.
6. Take Risks to Meet Customer Needs. In this dynamic, ever-changing market, you need to evolve with the times. Have you or your company remained stagnant? What worked in the past may not be as effective today. Reviewing and tweaking your business model as well as your personal skill set will be paramount to future success. It‟s dangerous to simply stand still and not make changes nor address changes in the market. We know that risk-taking is a scary proposition but it is the key to growth and to maximize your brand value.

Branding is essential and doing this right will make the difference between success and failure for your organization.

How To Get Chummy With Your Banker

“How To Get Chummy With Your Banker” from Inc. sheds light on an issue that many small business owners are grappling with - maintaining a good relationship with their banker in a tumultuous economic environment. From our perspective, the most important aspect of the relationship is communication. That means sharing  both the good and bad news, on both sides of the equation - the banker and the business owner.  If you build a relationship with your banker and treat them as a trusted advisor, assuming they are the type who wants to help, it will be easier to communicate the bad news and work through challenges.  The banker also has the advantage of working with many different companies and industries and can share insight which may be able to help a businesses specific situation. The lesson? Maintaining an open and honest relationship with your banker will allow him or her to provide you support and solutions during difficult times and be proactive in identifying ways to help you grow when times are better.  The banker/entrepreneur relationship is like any other - one based on trust and integrity will prove to be more successful.

A Business Lesson from Basketball

Derek Mehraban, an entrepreneur and social media guru, shares his insights on how businesses can take a cue from the Michigan State University basketball team in his blog post “MSU Spartan Stimulus Package for Detroit, MI”

His post touches on how creating a winning game plan is a critical component to the success of any company and our region. It is apparent that our current economic climate is creating pent up demand for the innovative products and services small businesses have to offer. Those leaders who invest the time now to re-evaluate their company, adjust their business plan and get creative, will surely be rewarded when the economy bounces back.

12 Tactics Entrepreneurs Should Consider

This outstanding Bnet article offers insight on 12 tactical moves (defense and offense) that small business owners can put into play now to weather the economic storm, particularly in the area of cash management. In a challenging economy, it’s important that business leaders focus on cash flow and are proactive in recognizing long-term working capital needs. It is beneficial for entrepreneurs to identify an alternative lender early in the process, before there is an immediate need. Also, CEOs and CFOs need to do their homework – does your working capital provider understand your business and industry, is there transparency regarding fees and processes and can they understand how the additional cash will be used and repaid?