Revisiting Your Business Plan

By Jeff Wright, Senior Vice President, Hennessey Capital

Every business, no matter what size, should have a business plan to be used by management as a tool to guide the company in achieving its corporate goals. It should describe the company’s strength, weaknesses, opportunities and threats and be accompanied by supporting assumptions. Over time, however, internal and external factors influence operating results. The business plan must be flexible enough to be and revised often to meet ever changing market conditions.

Do you have new competition? Are existing competitors doing anything differently that requires you to revisit how you do business? What are the needs of your existing or potential customers? Is sales volume increasing or decreasing due to economic or industry conditions? By reviewing these factors, management can implement changes to address the need to add personnel, buy equipment, improve technology, expand or move to a new facility, and finance the expected growth or cut personnel or overhead expenses, reduce inventory levels, sell idle equipment. It may require negotiating price increases with customers or finding alternative suppliers to maintain margins necessary to operate profitably. An action plan must be in place to address revenue and expense concerns.

Many struggling companies react too slowly to their changing environment. Reviewing actual operating results versus planned performance provides management valuable feedback. Unfavorable variances must be reviewed and changes implemented. Ask yourself what occurred, what are you going to do, and how are you going to do it will help get the company back on track? It is important be share the information with top management and involve trusted advisors, i.e. CPA or business consultant? The changes must be clearly defined so that everybody in the organization knows their responsibilities to make the plan a reality.

The business plan is a living document which should be continuously revised as market conditions and behavior change. It should include revised goals that take the company to the next level of growth and measured against expected results.

Moving from Prototype to Production

By Mike Semanco, President, Hennessey Capital

 

In our world of lending money to small and midsized companies for working capital purposes, we get calls all the time about how to commercialize a concept or product.  Most of the time, these conversations are very difficult.  Entrepreneur’s are passionate about their product and know it inside and out.  The challenge comes in the form of addressing the following unknowns:

1) is there a market?
2) how is the initial launch funded?
3) how do you scale the business if the product takes off?
 

Setting the stage to address the above questions was a recent dinner conversation with a budding entrepreneur.  She developed a clothing product for both kids and adults to use in the winter months.  Even though there are similar products in the market, hers has a few twists which makes it very unique.  I proceed to ask the questions stated above and hear the following. 

1) Of course there is a market, I gave it to friends and family to try out and they loved it. I think it could be a big hit in the retail market.

2) I hear commercials all the time from banks that they will lend money to small businesses so I will ask my bank for the money.

3)  I have no idea.

Interesting answers.  We proceed with dinner and I put on my coaching hat and do my best.

A market test with family and friends is a good start but if you truly want to build a business and not just a hobby, don’t think small.  First, have you determined if the product can be patented in order to protect your idea before you begin approaching specialty retailers and distributors?  As for financing the initial launch, I am sure sweat equity was poured into making the first few hundred products.  Since the business has been no sales outside of friends and family, the first round of financing will come from the entrepreneur’s savings account, possibly from family members or friends of friends who believe in the idea enough to take the risk.  Banks like to lend money to companies with a track record, typically 2 years or more and a history of some earnings.  Lenders who specialize in purchase order financing and receivable financing may be able to help but they will require the business to have sales or a purchase order from a reputable buyer. 

What happens if the product does take off?  Has the business owner considered which suppliers to approach for raw material as well as manufacturing, packaging and distribution sources? 

The process of moving from prototype to production can be a daunting task.  A task that an entrepreneur should not take on alone.  Remember the business plan that was written a few years back when you thought it was not needed.  Time to dust it off and use it as a framework to tackle the next stage in your business.  Your CPA, attorney, friends and fellow business owners should be leveraged to help you think through the details of moving from prototype to production.  This is an exciting time in an entrepreneur’s life but it can also be one of the most stressful.     

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.

Reprioritize Your Continuous Improvement Efforts to Maximize Profitability

By Mike Pircer, President, MAP Business Solutions

As companies constantly reduce resources in this tough economic environment, continuous improvement initiatives are being thrown by the wayside. Many businesses are still doing the same things with fewer employees but then find themselves coping with poor morale, disconnected processes, shrinking margins, and dissatisfied customers. Continuous improvement initiatives are either not being implemented or being executed poorly in which there are no improvements at all. Those that are being worked on have a tendency to be knee‐jerk reactions that are not well‐planned, do not involve all the key stakeholders and do not connect to the organization’s overall strategy.
Companies need to recognize business processes as value streams. These streams represent all value‐adding and non‐value‐adding activities that are required to deliver a product (good or service) from request to delivery (and ultimately, to receipt of payment from the customer). Knowing what the customer values and is willing to pay for helps differentiate which activities are truly required.
In order to put continuous improvement back in play, these are the priorities in which an organization must focus on:

 
Priority #1: Eliminate unnecessary non‐value adding activities. An organization can uncover the unnecessary non‐value‐adding activities through a myriad of tools such as:

• Value Stream Mapping
• Customer Surveys/Interviews
• Warranty Claims
• Customer Complaints

Once an organization identifies the unnecessary non‐value‐adding activities, then the required resources can focus on the elimination of these activities. These are usually “low‐hanging fruit” and can be done quickly and cheaply.

 
Priority #2: Reduce necessary non‐value‐adding activities. Necessary non‐value adding activities are recognized as processes that the customer doesn’t care about, but they are necessary to keep the operation going. These types of activities could include:

• Invoicing the customer
• Sales calls
• Material handling

For example, a salesperson for a computer repair company may be out in the field making face to face calls on prospects and clients. While the client doesn’t value (or pay for) this activity, it is necessary in order to generate more business for the organization. An improvement initiative may be to reduce the amount of travel time for the face to face meetings and incorporate more internet marketing processes. In these areas, the goal becomes to reduce the effort required to assure compliance and proper operation of the business.

 
Priority #3: Optimize value‐adding activities. These are considered the organization’s “bread and butter” processes. Improvement activities could include projects that focus on reduction of cycle time, reduction of defects, and/or reduction of downtime. Improvements in this area are generally more time and resource consuming and could be more costly.
While optimizing value‐adding activities is important, lean thinking shows that faster and more dramatic results occur by first eliminating NVA activities. The outcomes from eliminating NVA are measurable and wide ranging, including faster delivery, improved quality, freed capacity, and reduced inventory – all of which lead to greater customer loyalty, market share and reduced expenses. Collateral benefits that result from eliminating non‐value‐adding work include improved interdepartmental and interpersonal relationships, safer working conditions, and reduced workforce frustration – all of which create a work environment that attracts and retains a talented workforce, which, in turn, leads to further business growth.1
1 Value Stream Management for the Lean Office, Don Tapping and Tom Shuker

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.

When to Consider Hiring a Temporary CFO

By: Jeff Wright, Senior Vice President, Hennessey Capital

In my 27 years of asset-based lending and commercial loan workout experience, I have consulted with many small businesses that know how to manufacture a product but have difficulty managing the financial aspect of their business. This includes companies that are experiencing significant challenges as well as growth-oriented companies. Many rely on trusted advisors like their CPA, banker, or attorney to provide assistance on financial matters affecting their business. However, these key advisors are often handling many clients, or may not have experience in your industry to provide targeted guidance on some of the complexities of the situation.  When this is the case, a temporary CFO can provide invaluable insight and expertise in evaluating and managing your business finances. Owners can draw on the CFO’s experience to fill skills sets management does not possess. This frees up management to address operational issues and marketing initiatives. Owners, however, must be willing to give up some control.

It goes without saying that small businesses need strong financial support in place. A temporary CFO with experience in the industry can provide invaluable support in the strategic planning, budgeting, and cost control for a small business as they grow. Their objective opinion can be helpful when considering taking on a new project, investing in new equipment, or evaluating overhead expense to improve cash flow. A temporary CFO’s experience can also be used as a resource when discussing financing options with a lender or suppliers, and in dealing with customers. They can also implement financial systems to monitor the financial performance of the company and provide timely reporting to help management make educated business decisions.

The primary role of a temporary CFO is to manage the cash of the business. Ownership can draw on their skills on an as-needed-basis without expending significant dollars usually required for a full time CFO.  If you could use additional assistance in managing your financial operations and benefit from an outside perspective, it may be time to consider a temporary CFO for your business.

Asset-Based Lending Grows in Popularity

An article from this Tuesday’s Wall Street Journal highlights the flexibility  that asset-based lending provides.  Weezabi LLC, the company highlighted in this story, is a prime example of how small businesses can use an asset-based line of credit to say “yes” to new business opportunities. Read the article

SBA Lending: Down But Not Out

Although SBA lending is down sharply in 2009 compared to 2008, the movement of new activity as of late, is a positive sign of good things to come.  Even a slight increase in activity will give entrepreneurs some level of hope that a bigger credit thaw will happen in 2010.  In the meantime, entrepreneurs need to be creative and think outside the bank box for financing solutions.  Asset-based lending, factoring, PO financing and equipment leasing will continue to be viable solutions to today’s financing challenges.

So your customer needs a rush order?

There are a variety of red flags that can signal a potential problem with payment and/or collections from your customer. Beware: repeated rush order requests is one of those red flags. A sudden need for a “rush order” from your client might signal cash flow issues on their end. This might indicate that your customer has not planned accordingly for work flow. It could also mean they are short on cash and need to expedite delivery of a good or service, to speed up their payment and resolve a cash bind. If an unexpected “rush order” request is made, don’t be afraid to ask questions of your customer, including why the rush order is needed. You may also want to ask “What happened during the production cycle to cause this sudden need?” “Do you anticipate additional rush orders in the future and why?” The answers to these questions may signal there are troubles ahead. Keep in mind a one-time request doesn’t necessarily indicate a problem, but if you receive repeated requests from the same customer, you might want to think twice.

Macomb Incubator Promises Progress for Small Businesses

The new site of entrepreneurship for Macomb County was unveiled on Monday in Sterling Heights and what a sight it was.  After interacting with many of the 400+ business owners, professional service providers and dignitaries, it was clear that entrepreneurship in Macomb County is alive and kicking.  At a time when negative press is running wild, it was great to see so many folks energized about what the future has in store for our region.  Business owners were excited about being able to leverage the Incubators talent in the areas of sales introductions, marketing, finance, business coaching and business planning.  It will be a valuable resource in moving entrepreneurship forward. Learn more about the Incubator

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