University of Central Oklahoma Small Business Development Center

 Pondering the SBA ARC loan - Part One

 DISCLAIMER:  I am not speaking on behalf of the SBA.  These are the thoughts of someone who has worked for a long time with SBA programs as well as with small business clients.

Because of working with both the SBA and clients, I can give observations from both sides.

QUALIFYING FOR THE ARC LOAN

Facts:  The ARC loan is part of the stimulus package and provides six months worth of principal and interest payments on qualifying debt.  The ARC loan is not for start-up businesses (less than two years old), and for "viable" businesses, with a definition of being profitable one out of the last two years.

My observations:  I have dealt with many small business clients and many types of SBA loans.  SBA loans can include what I call "regular" loans - loans for start-up, expansions and so forth, and "disaster loans" - these are loans that occur because of declared disasters such as fire, flood, tornados, wildfire, ice storms, and so forth.  The ARC loans fall more in the disaster loan category.

SMALL BUSINESS OWNERS ON THE EDGE:  What I have observed over the years is that there are a number of small businesses that live on the edge in that their businesses are fragile.  It's the small business equivalent to the person who is living paycheck to paycheck, and in the small business case it's sale to sale, juggling obligations, payables and notes.  As long as the "paycheck" arrives, things go along.  But when the disaster hits, then it pushes them over the edge financially. 

DON'T KILL THE MESSENGER:  I have seen this in helping people apply for other disaster loans in that they cannot qualify for the disaster loan because they really are on the edge, they show no profits.  Sometimes it's because they don't have profits, and sometimes they don't show all the income such as "we really make more than what we show, we just don't show the cash sales", and they've already gotten their benefit, just by not paying taxes on profit.  

With all of these, the definition of a viable business is one that is doing OK except that this disaster, in this case, economic crisis, has dropped the income of a decent and generally solid business.

The ARC loan is not meant to be a "bailout" but a temporary help to good and solid companies that have gotten into a bind.  I have seen clients that have had good companies and then over the last year,  their sales have been hit hard and having to respond to that.  I also have other clients who were/are in fragile businesses and some are rocking along and some are no longer rocking at all.    It's very distressing to us to see this, because we really care for our clients and want all of them to succeed.  Sigh.

So don't shoot the messenger (us!).  The ARC loan is only for a company that with six month's help can probably and likely gain their balance and footing again.

We'll be looking tomorrow at finding a bank that deals in ARC loans.

 Discovering hidden talents from you and your workers.

 When times are flush, it's easy to just pay for items, or put employees into a job category, and there you are.  On the theme of "necessity is the mother of invention"  this is a great article about how companies and workers are finding hidden skills and talents that can help both parties.

The story is about a man who was a customer service person who a year ago, began to volunteer to help maintain some of the firm's computer systems .  He had some skills, learned a lot by doing, found he had some aptitude, and the 100 person firm figures it is saving as much as $1,200 a week in tech support fees.  More value to the company?  Absolutely.  Helping with job security?  No doubt.

It can be a "stretching" experience, but also one that is very rewarding.  We're finding that here at the UCO center as we have been moving.  How do you look great for nothing?  We've drawn on everyone's home renovation experience, and have done a great job, supplemented by a little donated help.  Larry's operational manager's experience has been phenomenal in helping us with facilities, set up and dealing with contracted services we can't do ourselves.  Carlos has found a talent in working with wiring.  We've had to trouble shoot some things and he's saved us from several service calls.  Susan is chief scrounger, and between our penny pinching friends at UCO purchasing and surplus, has gotten some deals.

Look at your own work crew.  Downturns can provide a great psychological prod as employees want to make themselves more valuable.  And I don't know of any employer who enjoys letting people go.  If you can be more creative with what you have and it saves you money and/or makes you money, everyone wins.

Corporate giving, sponsorships, affiliations

 Every Sunday morning I listen to a program on UCO's radio station KSCS, called "Sing For Joy", which is an half hour choral music program based on the scripture readings for that Sunday.  The program is based out of St. Olaf College in Northfield, Minnesota and is a Lutheran affiliated school.  In Oklahoma, we are far enough away, that you say - St. Olaf College, it may not mean anything.  But if you live in the upper Midwest, it is a fine school and especially renowned for its music and choral tradition.  

In the non-profit world, sponsorship not only means dollars for the organization, but there is a marketing and advertising benefit for the sponsoring company.  For the donating company, there is a benefit and a visibility of aligning ones company with a group that they have affinity or a relationship.

Why do I mention "Sing for Joy"?  Two reasons.  They have two major corporate sponsors.  One is the Sauder Company, which has a couple of divisions - one is furniture, specifically the ready-to-assemble home and office market, and the other, are furnishings for the church.  OK.  This makes sense in terms of a sponsorship and visibility of that program.

But the one sponsor that just gives me a smile every time I hear it, is the Sukup Manufacturing Company in Sheffield, IA, manufacturers of grain handling, drying and storage equipment.  This is not what I would figure I would hear sponsoring a music program.  Very likely the owners of the company are either Lutheran, choral singers or St. Olaf alumni.  And in that area of the country where the program originates, there are probably people around listening who do have a need for their products.  

I have a need for some auditorium type chairs, and you can be sure that one place I'm going to check is Sauder - thinking of them because they have been brought to mind week after week after week.  This is the power of using sponsorships for companies.

A little drivel on eBay

 Online sales can be a great opportunity for a small business.  eBay, craigslist, Amazon, Etsy can all be additional avenues to sell your product.  While we have been teaching primarily eBay, we're going to be expanding to address some of these other opportunities and ways of getting products online.  Everybody has just a little bit different twist on customers and markets as well as advantages and disadvantages.

Just a little funny cartoon for the beginning of your week.

 A little bit here, a little bit there

 It all adds up to real money.  I talk alot about businesses cutting costs, but those of us connected with colleges and universities are doing the same.  We have one printer filled with scratch paper - already printed on one side.  If what you are printing doesn't require an absolutely fresh piece of paper, use the second side.  Purchasing has said that the more you use your purchase card and don't have to use requisitions and PO's, the more staff time, paper, checks, and postage saved.  Very small items, but all those kinds of things can add up.

As we have been moving into our new facility, I "shop surplus" at the university for items that still have life in them and I can reuse.  I've found some great items, and free certainly saves money!  We still look like we've spent lots of money in renovation, and we really haven't!

So today's article highlights ways that some institutions of higher ed are rethinking some expenses and being creative about getting things done in a cost effective manner.  Might spur some thinking about your own business!

 Consumer Protection handbook for Resale Stores and Product Resellers

 Some months ago we received some panicked phone calls from resale shops as well as people simply wanting to host a garage sale and they had children's items.  There were some law changes on a federal level with lots of confusion and major issues concerning used items, clothing, toys, even books.  This falls under the US Consumer Product Safety Commission and their website is here.

The handbook has just been released.  You can download a copy here.  You can also sign up for their email newsletter as well.

 Facebook, Twitter and websites, oh my!

 Face book, Twitter, MySpace, company websites, Plaxo, LinkedIn and the goes on and on.  Every day there seems to be a new site, a new way or another link that people are using for social networking and businesses are using to reach their customers and sell their product or service.  Many successful businesses are using them advance their business.  Are you using these to help your business?

The social networking issue is a broad topic.  For this blog, I want to quickly look at company websites.  In my opinion, Amazon has the quintessential company website.   I’ll admit that I’m hooked on Amazon.  When I log in, they have recommendations for me, hot new releases and I can easily check the status of my order.  But, many sites have similar capabilities.  What separates Amazon is the fact that within 24 hours of visiting their website, I’ll get an email on a related book or something totally unrelated – Crocs or electronics or their new Kindle.  Good consistent follow up to help keep Amazon front of mind as I make choices about my next purchase. 

It also doesn’t hurt that their prices are the lowest around.  Great service and great price – a hard combination to beat. 

How are you using your website?  Is it merely an online brochure or is it something more?  I’d encourage you to look at your website (or get one if you don’t have one) and use it to advance your branding and positioning, to sell products and to differentiate you from your competition.  We’ll talk more about this is our Small Biz Pro series and ways to use your website as a competitive advantage tool.

Sorry, got to go.  Just got another email from Amazon about another book they’re recommending and a new list of specials for Father’s Day.

Until next time ……. Tim

A reminder to sign up for the first Small Business Pro Series, begins June 10!

 Most Current SBA products with stimulus changes

 Thanks to the 34 people who were more than patient as we stuffed and crowded them into our conference room on Friday, to learn more about changes in SBA products due to the stimulus changes.  One of the things we learned was that the ARC loan is beginning to get some guidelines but is still a work in progress.  I am attaching the powerpoint for those who were not able to make it. 

We'll have Sandra back again when the time gets a little closer for final rules on the ARC loan.

We've been working with a lot of financial restructuring.  We can be helpful in helping you work with your banker in understanding what they might, or might not be able to do.  It's sometimes hard to remember that banking is a very regulated industry and so it's not that they are not willing, it's sometimes that they are not able to do exactly what you would like!  Click here .

 Shifting brand strategy for long term sales

 I recently read in the Wall Street Journal about Procter and Gamble’s strategy for growing revenue in these down economic times.   In the short run it may mean a decrease in margin for the consumer giant, but in the long term P&G hopes this new strategy will grow top line revenue and slow down customer defections. 

For many years, P&G has focused on the introduction of new, more sophisticated (and more expensive) consumer products to the market.  This allowed the company to keep customer in the “family” and help the company continue to grow both revenue and profitability.

With the recent nationwide downturn, the consumer has begun to look for lower alternatives in the consumer household goods sector.  Private label and lower priced goods have experienced a startling growth pattern in the past few months.   

To combat the loss of market share, P&G has reevaluated their brand strategy – and plans to increase the offerings of its lower priced goods.  Here are a couple of examples:

·      Instead of the higher priced diapers, Pampers, P&G will now shift more marketing dollars and brand attention to Luvs.

·      Instead of the higher priced detergent, Tide, P&G will try to drive consumers to Gain.

While this strategy may cut into margins today, the company hopes to keep the consumers in the brand family – and when the recession ends and some consumers upgrade, the company hopes the consumer will upgrade with P&G.

Do you have a similar opportunity?  Do you have a lower priced product or service that can be offered instead of the premium product or service?  If not, can you develop or get one to offer?  In tough economic times, the most important part is to be able to get through the difficulty and exit a stronger competitor.  There will be many businesses that refuse to change their strategy or take a smaller margin in the short run.  In the long run, many of these companies won’t be around or will come out of the recession, a weaker company than before.

Until next time …. Tim 

 Continuing the discussion on customer service - dealing with your top customers.

 Of course you want a level of good customer service for every customer you have.  But you probably have a category of your top customers.  These are the customers who buy the most from you, and/or who are just crucial to your business.  What kinds of things can you do to even increase the level of service to those VIPs.

 Customer Service - part of your growth plan

We hope that good customer service is part of your plans for growth and revenue.  In the Small Business Pro seminar we are going to talk about that part of your business mix.

 Can less be more?

 As you know, Wal-Mart started with one store in Rogers, Arkansas in 1962.  Within 5 years, there were 24 stores.  Like a juggernaut, the company continued rapid growth and today, Wal-Mart is the world’s largest retailer with over 2 million employees and over $400 billion in annual sales.

 What does a $400 billion company have to do with small businesses or our Small Business Pro series?  I’ve just noticed something the last few months that is interesting to me and may provide a small lesson for us.

 Has anyone else noticed that the aisles at Wal-Mart have been much less crowded for the last few months?  In the stores I have been in, the aisles in front of the cashiers no longer have merchandise down the middle.  Likewise, other big aisles are much more open and don’t have the amount merchandise that has been trademark of Wal-Mart. 

 I’m not sure why, but I do have an opinion.  For the past few months, Wal-Mart’s top-line revenues have been flat but profitability has been marginally better.  The economy has taken its toll on most retailers and it seems to me Wal-Mart has reduced the amount of inventory in its stores and managed profitability by using active inventory control procedures.  It may seem odd for a company to have less in the stores to sell, but by reducing inventory handling and holding costs, the company can impact profitability even though revenues are flat.  Let’s see if the company puts more merchandise back in the aisles when the economy turns and the company’s revenues increase.

 For small business, think about your inventory and the costs associated with it.  While I am a strong proponent of growing companies through revenue growth, we must not overlook ways to improve profitability on the expense side.

 Got an opinion – email me at smallbizpro@osbdc.org and if you haven’t already enrolled for our Small Biz Pro series, please go the OSBDC website and give us a look.

 Until next time …… Tim 

 Who's On First??

 We all either seen or heard of the famous Abbott and Costello skit of “Who’s on first?”  In this classic skit, the two comedians banter back and forth with one trying to convince the other that a person named who is on first base. 

To borrow from the skit, I would say when it comes to running or leading a company,  “who” is first.  In other words, getting the right people on your team and getting them going in the same direction is the most important thing we can do to make our company great.  Let me explain.

In the book “Good to Great”, the author, Jim Collins, posits that great companies are ones that get the who right first and then products, services, meeting competition etc. will follow.  After years of leading organizations, I totally agree.  In today’s competitive marketplace, there are very few, if any, products or services that sell on their own.  Pricing, competition, market conditions, and many other factors influence customer purchasing decisions. 

That’s where the “who” comes in.  People and relationships make a difference.  Collins calls this getting the right people on the bus.  When the right people are on the bus, producing, manufacturing, marketing, and selling are improved as are the company bus roars down the highway towards success.  How many times have you seen a great product or service that failed not because of the product or service, but because of the people on the bus with the product?

In our Small Biz Pro series, we’ll talk about how to get the right people on the bus and how to get them to make the bus run as well as possible. 

For more registration information on the Small Biz Pro Series, visit the website at osbdc.org or email me at smallbizpro@osbdc.org.   ‘til next time ……….. Tim 

 Turning a situation around.

 You know, Tim and I have been talking a great deal over the last few weeks about revenue generation.  Just a story from working with one of my clients.

  We've seen a lot of issues with established companies and downturn.  One of my clients has had a great deal of trouble in the last six months, and she came in to talk about trying to sell the company.

  I guess my mantra in the last month after all my conversation with Tim is, you can't grow a company by just cutting expenses.  You have to grow revenue.  So we looked at everything from that standpoint (she had already done as much expense control as she could), and we came up with three small items that could be implemented immediately.  Two of them involved strategies that had no costs associated, and one had a very small under $100 cost.

She took it to hold and I've gotten an excited email from her about starting to implement some of those ideas.  I see excitement, and not only that, but those ideas for revenue generation will go straight to the bottom line profit. I think we might be in for a turnaround here.  This is what we want to talk about in our  Growth Strategies in Challenging Economic Times - opening up to possibilities.   ......Susan

 Coffee Mega Wars - Competition and Positioning

How many of you are coffee drinkers?  I am and so the recent battle between two titans is an interesting one for me.  It provides us with insight and ideas about marketing, branding and positioning. 

Starbucks has been, until recently, a darling on Wall Street and with consumers.  Its rapid, meteoric expansion has been breathtaking to watch.  Through it all, the company has conveyed a certain culture, a certain ideal, a certain “we are different” attitude.  Founder Howard Schultz had guiding principles and ideas about Starbuck’s and implemented these principles as the company grew.  For instance, Starbuck’s offers health care to any employee who works more than 20 hours a week – a Schultz initiative based on an incident while he was growing up.  (Come to our Biz Pro Series for the why he did this.)  

While the company has been hit by the recent economic downturn, it is still a great company that we can analyze to help us grow our business.

 The other titan involved in the Coffee mega-war is McDonalds.  That’s right, McDonalds.  I’m sure by now you’ve seen their series of new commercials touting McCafe – their new line of hot coffee drinks.  Needless to say, they are trying to steal some Starbuck’s customer and expand a product line they see as very profitable. 

 Who will win??  We’ll examine this ongoing Coffee War and how you can learn from it.

 By the way, drop me a line at my email on the OSBC website -- smallbizpro@osbdc.org  with your comments about my blog, the video we posted or about our upcoming series.

 Until next time …. Tim

 Owwww!!! Damaged thumbs and small businesses.

 I hope by now you’ve seen our video introducing our upcoming seminar “Growth Strategies in Challenging Economic Times” – part of the SBDC’s Business Pro Series.  Over the next few weeks, I’ll be posting blogs 3-5 times a week to provide insights and quick looks at the things we’ll be working on in the seminar. 

Recently, I had a serious accident that damaged my thumb.   I called my doctor to let them know we were on the way and to tell them what I had done.  To my disbelief, the receptionist told me they we full that day.  Once the shock of her answer wore off, I repeated the seriousness of my injury.  Her reply – “You may want to a minor emergency clinic or emergency room.”  Needless to say, I ended up in the minor emergency clinic. 

What does this have to do with running a business?  Let me give you a hint – niches in the marketplace are created because of problems that companies don’t or won’t address.  We’ll talk about this in the competitive section of the seminar.  If you have comments on my blog or want to email me at smallbizpro@osbdc.org

 Hope to see at the seminars on either June 10, 17 or 24th- Tim

Growth Strategies in Challenging Economic Times

 You don't grow a company only by cutting costs. Especially in challenging economic times, you need to continue to focus on generating revenue. This course is for the company who has a few hundred thousand in sales and wants to grow to be a million dollar company. Or more. Even in these times.

 Friday drivel

 THE ECONOMY IS SO BAD . . . . 

They Shoot Horses, Don't They?  Movie.

 They Shoot Horses, Don't They?  is an older movie that was about a dance marathon in the Great Depression.  It was a form of both entertainment and a way to possibly get some prize money to help out during a really rough economic time.  In a dance marathon, basically, the couples dance until they drop, days, weeks, and in this movie, even longer.

This is a good movie and you very much get a sense of the grueling work it took to outlast everyone to get the prize.  In this case, it was quite a bit of prize money, so it gave a real incentive.

I was reminded of this movie as I was reading the newspapers the other day.  It was a WSJ article on Macy's Pursues Customers of Fallen Rivals.  Just like the marathon dance, everyone starts out at the same time.  But little by little the field narrows.

That's what is happening in the economy.  There will be a winnowing out of companies, and so while it is just hard slogging through, there is also an opportunity in the downturn, because the customers of the old companies need to go somewhere else to purchase their goods and services.

The issue is being one of those companies who can last through the tough time to make it to the profitable ones.  In the next few weeks we are going to be highlighting information and some education on growing revenue even during challenging times.  Stay tuned!

 The culture of thrift.

 Not a phrase that we would use about US spending habits of the last few decades.  It would definitely be something said about my 101 year old grandmother who raised her family on a farm in Nebraska during the Depression.  She wastes nothing.  I mean nothing.  Since she no longer is in a place where she does her own cooking, we don't see that thrift quite like we did especially with food.  We said that she could not need to go to the grocery store for months because of what she had in her pantry, gotten on special of course, or the myriad of cooked dishes, leftovers and so forth that filled up it's stand alone freezer.  She would never, ever be caught hungry, no siree.

And her thrift allowed she and my grandfather, who did not work at high paying jobs, to have a modest nest egg that with shepherding has allowed them to have a comfortable retirement.

This article talks about how the financial pulling up short that we have had may affect us for years to come.  That even while things will get better, and they will.  We will likely not return to the same high flying consumer patterns and even credit patterns.

It is my belief that one reason Oklahoma has not been hit quite as hard as other places, is that we have enough banks and lenders that remembered the overly high flying days of the oil boom.  We did get out there quite as far, especially in the housing area, as some areas.  Now if YOU and YOUR business are hurting, and we're seeing plenty, it may not feel like we are in as bad shape as other areas.

So if you are waiting for things to be the way they were again, that might not be the best strategy, especially if you are in a retail business.  So we've lost wealth in our investments and houses, and so people will need to continue to squirrel away money over a longer period of time.  Of course, the typical American consumer had no savings rate before the last year, so those are dollars that are taken out of circulation in terms of being available for businesses.  From the article.....

Whether for reasons moral or otherwise, consumers are already thinking a bit differently about their long-term budgets. A recent Pew Research Center survey found that many more Americans had begun regarding products like microwave ovens as luxuries rather than necessities.

Such attitudes suggest that retailers will have to change their marketing strategies, said J. Walker Smith, executive vice chairman of the Futures Company, a marketing and research consultancy.

“People are realizing they can’t accumulate everything they want anymore, and they’ll have to prioritize more,” he said. “That may be hard for a lot of brands — figuring out not only how to get considered by consumers, but put at the top of their list.”

Consumers planning big purchases are also anticipating that their borrowing options will remain limited.

 v

 Negotiating with your banker.

 We are seeing many more clients, who, with a downturn in sales, are having trouble making loan payments.  Debt that wasn't bad when sales were more "normal" now looks like this daunting mountain.  One concern is that the banker is going to immediately come in a start foreclosure proceedings.

What you really need to know is that they really don't want to do that unless there is absolutely, positively no other recourse than that.  Just remember that a bank is a private business.  It doesn't make huge amount of profit on bank accounts, but it lives on loaning out money and getting it all back with interest.  While yes, a banker will take as much collateral as possible, a banker will always tell you that they don't want to see liquidation value as a first source of repayment of a debt.  They want your business to succeed and pay them out of cash flow and profits.

What you need to be able to do is to go in with good financial information and some sort of plan to discuss. We can help you with looking at what some options might be, but the first thing we need is good financial information to see what is happening in your business.  Let me give you some examples of what we've seen lately with clients working out arrangements.

Client A has been working on several fronts.  We looked at the kind of debt that she had with the bank, and worked around what could or could not be possible in terms of stretching out the term of a long, thus making the money payment smaller, could some some loans be rolled together, could there be a deferrment of payments, or perhaps of principal, could everything be wrapped up into one note?   At the end of the discussion, we came to the conclusion that the bank was doing the absolute best that it could for her with the arrangements they had made for several months to be able to help her. 

We're getting ready to help Client B go to the bank.  They have several loans, one of which includes property as collateral.  We're going to approach the bank that they take out the small first mortgage, add a little extra cash, again for a bit of working capital to get them into the busy part of their year, and then put them on a regular payment term.  While we are asking the bank to take on more debt, we are actually improving their collateral position, we are taking them from interest only to a payment that begins to pay down principal, and the client actually saves about $600/month in payments, which is a real boost.

Your banker knows that the best way for you to repay the loan is for you to stay in business and be profitable.  In this day and time, trust me, you are not the only one who is having to deal with this.  Many companies who have never had cash flow trouble are having to work with an economic landscape that shifted rapidly.  

 Skype and the iPod Touch

 In my previous post I talked about some of the features about the iPod Touch (I call it the iPhone Lite :-) and that the communication software Skype can be used on iPhone and they said iPod Touch with the right headset.  

So I went out and got an iPhone headset.  Oh my.  I can now make phone calls easily from my iPod.  I am totally impressed.  The call actually felt a lot more stable and clearer than when I am making a phone call from the computer to either a cellphone or landline.

A little computer in the hand.

 You've seen a ton of people with their iPhones, and yes, I admit to having some envy about that, but I am so incredibly hard on my cell phone, dropping them on hard surfaces, and more importantly having a little immersion baptism in various sorts of bodies of liquid, that I feel simply unworthy to have a phone that costs many hundreds of dollars to replace.  The other issue is having to have the data plan on top of the cellphone plan and it's just a more costly monthly expense than I want.

But I took the plunge in trying the iPod Touch, which is like an iPhone lite.  You get wireless capability, you just don't have the phone or GPS.  Oh my, this is has been a revelation.  I have absolutely loved the Touch.  If you have any other of the Apple features like the MobileMe, it's pretty phenomenal.

But then, here comes more!  Now Skype, another one of my favorite little applications, can be used on the iPod Touch, and if you get one of the iPhone stereo headsets which has a little microphone in it, you can actually make Skype phone calls on your Touch.   Ooooooooooh.  This is really big.  So I will be getting a pair this weekend and try that out.  Click here for the Wall Street Journal article on the Touch and Skype.

Also - just be aware that we are teaching training on using Skype.  For more info, click here.

A little drivel for the morning.

 If you have flown any time in the past year or so, you know that it seems like airlines are adding little fees here and there which add up.  One cartoonists vision of the next fee.  We hope not, but then who would have thought we would be packing bag lunches for the plane?