What Should Be The Yearly Objective?

Starting A Business

Volume X

What Should Be The Yearly Objective?

People who have never owned a business, never been financially responsible for a business personally, always have a rosy and romantic opinion of what the yearly objective of any business should be. Is that surprising? There is only one objective for a business, how that objective is attained differs according to the philosophy of the top executive and its board of directors or the owner of the company, if it's an S.M.E. In order to stay in existence, a company requires certain essentials. Without those, there isn't much left to be called a business of any kind. No matter what is the type of corporation, the objective remains the same. Yes, even a "Not-for-profit" corporation, a charitable organization or a foundation. The objective is the same: Stay in Business. For that to happen, all businesses need one thing at the end of the year, after all is said and done, after they have paid everything and everyone, they still need to have sufficient funds left at the end of the year beyond the "breakeven point". They need to start the new year in the black.

In this series on "Starting a business" we have covered the essentials required for a successful launch and development of a business in general terms. Those essentials are true and valid for all types of businesses of all sizes. Let's recap the main essentials covered:

1. A good or service responding to a need in a given market. Make sure the need is not just yours or that of your friends. This is not the time to preach to the choir. If you are going to take a chance in business, make sure that what you are bringing to the market, people are actually willing to trade money for it. Your friends and Family do NOT constitute a Niche Market. Use them to test your product or service and get feed back but you must do your homework and research your market. If there is no market study or ready available Data, compile it yourself or hire a professional to do so for you. But you need to gather the Intelligence so you can elaborate your strategy and plan your business.
2. A Team of experts to support your business. You must ensure that you are not the only one who understands what needs to be done. That would lead to disaster as you will have to be running every position your self. Each pair of hands need an independent, knowledgeable brain to direct them. You cannot be the only brain in your organization trying to direct every pair of hands. So make sure that you are delegating properly to a team leader that is an expert in his/her field and give them skilled people for them to lead.
3. A sales Team to keep the business running. As we already covered in the previous volumes, without sales there is no funds, therefore no budget and consequently no business. Even if you are a single individual, like a consultant, with no employees, no boss, just little old you and your expertise. Even if you are so good and famous, you still need to sell yourself, your brand, your knowledge. Neglect that point and you will not stay in business  beyond the next Brainiac in your field with more flair who comes to eat in your manger. You must be loyal to your clients, but they don't have to be loyal to you, unless you give them a reason to be and... keep reminding them of that reason. Just assume that your clients are afflicted with permanent Attention Deficit Disorder so you must constantly attract their attention so they don't forget you.
4. The proper Location for your business. For most businesses, not just real estate and hospitality, the 3 "L" are of the utmost importance: Location, Location, Location. We covered that in Volume VII.
5. Funds at the end of the Year to keep going: Last and not least, whatever your business is, it takes money to pay for everything you buy, the taxes you owe, the people who work for you and yourself. That is the required minimum. After all is said and done, at the end of the year, your company must have generated enough margin to cover all of the expenses, and to set aside enough for unexpected future expenses, re-investment and development (each type of business uses a different coefficient to compute how much, but on average plan for 10% of your gross sales as your total rainy day fund should be a minimum) . Those funds must be segregated, like a rainy day fund. But the total amount of all I just describe is the bare minimum. One penny less that that total and you are in the red. Maybe not technically, because you can always dig in the "Rainy Day fund" but you will be sooner or later.These funds constitute your operation budget. They will be required year in and year out, just to operate. 

 As I said earlier, politicians and mostly people who have never had to dip in their own pockets to cover the expenses of a business who is going through a rough economic time, do not understand this and will not understand until they open a business themselves. If and when they do, either of two things will happen. Their Romantic view of the business objective will change, or... they will go out of business sooner rather than later.

Business Objective is not to be confused with the Mission Statement of a company, nor its Philosophy of Operation. It is simply a mathematical and financial objective. For a business to survive from one year to another, it must generate enough funds to sustain itself. Even a charitable organization or a "Not-For-Profit" corporation. If the business stops paying its employees it will have no one working and producing what is needed to be sold. Even if the entire staff is made of volunteers, and the goods are donated, there are still expenses that must be paid, therefore funds are needed. In a Charitable organization, the Sales Team doesn't sale a product, but works to raise the funds from benefactors. The work is the same, sell the idea that this organization and its objective and mission is worthy of the benefactors donation. It must raise more than it needs for a given year if it wishes to grow.

Just as any living thing, and in a very real sense a corporation is a living entity, albeit not an organic one, it needs to grow. It starts small and grows. When growth stops, decline begins. There is no such a thing as a stagnating business. If the growth curve is flat, someone is eating away at its market shares and sooner or later, if nothing is done, the changes of the market, will make the growth curve a decline curve. Change is the only constant in Business, stagnation is a indicator of inability to adapt to change, and if that occurs, there is only one way to go: Down and eventually out. No matter how many centuries you have been in business. The day you stop growing is the day you start declining.

The difference between a For Profit Corporation and a Not For Profit Corporation is the distribution of that profit. It is NOT the absence of a profit. The former distributes its profits to its shareholders (owners) as a dividend on a prorated basis to the number of shares of the company they own. The latter reinvests 100% of that profit back into the company so it can grow and do more of whatever it is the company does.

The objective is not to create jobs, or to do away with jobs, it is not to provide income for its employees or benefits packages to them. The objective is not even to provide a good or a service to fulfill a need of the community. NO. None of that are the objectives, they are the means to that objective. The only objective of any company is to Make a Net Profit. THAT'S ALL!!! Even if it is a single penny. Yes, everything else is a means to that objective, not the end. If a Company made even One Single Red Penny as a Net Profit, it is not in the Black. That means, it paid all its employees, including benefits and bonuses. It means it paid all its taxes, all its Interests and all its suppliers. It paid its rent  and its utilities bills. It even paid for the Salary of the owners if they take one. After paying all of that, if there is still one penny left over, then the company made a net Profit. That profit can be reapplied to the company if it is a non-profit corporation or a foundation or charitable organization, or it can be passed on to the shareholders.

Without a net profit at the end of the Fiscal Exercise, the company will not be able to own up to its obligations. It goes without saying that a company who has a philosophy of caring for its employees and community is preferable to one who will cut and slash anything and anyone in the name of the almighty dollar. But it is also not just for philanthropic reasons a company must be a good company to work for and a great company for the community, it has its business advantage. Happy Employees spread the word of mouth about the company they work for in a good  and positive way.  They also take pride in what they do and generally believe in the product and service they bring to market. That pride and confidence  radiates from the employees to people around them and in today's Mega-Social-Media world, it spreads at lightning speed. It is the best form of advertising. If the community benefits from the actions of the company on a social and philanthropic level, the goodwill this generates in terms of positive image and public relations translates into real dollars. The old myth of the mighty and Evil Industrial Barons who care nothing for anything or anyone but the net profit they make is just a myth in the feverish mind of populists left over from the YeYe era of the 60's who speak out of ignorance regurgitating facts gleaned from public records and spreadsheets they do not understand and never will. For every Evil Imperialistic Industrial Conglomerate who wish to dominate the world there are hundreds of thousands of small and medium enterprises who just want to grow and survive, making a modest profit by bringing to their community a needed product or service.

So, who's predictions were right about the Elections?

 In 2009 I wrote a long winded article about what let to Obama's victory over Clinton first, then over Mc Cain. Last August I revisited that article and updated it in prevision of this year's Presidential elections, adding my personal take and prediction on who might win the White House this time around depending on what may or may not occur shortly before election day. I copy-pasted the Paragraph that spells it out and I must admit that until yesterday I didn't think that I was right with prediction, so here it is:

..."People want to know who has the best plan moving forward. As things stand, I'd say that unless the conservatives wake up and put out a detailed, step by step plan, clear and simple enough to understand, it's a toss up. On the other hand, if they focus on demonstrating, in a very concise and understandable way, how they are proposing to resolve today's woes, it's their election to lose. Their message must be simple enough so that the Lay-Man can make up its own mind whether it could work or not without relying on some Pundit in the media to put it in words he wants to hear but doesn't trust. Then it will be a landslide for the conservatives. If there are any doubts about how to move forward and if the economy expands ever so slightly and/or unemployment figures drop below 8%, then Obama will most likely be re-elected by the narrowest of margins but re-elected nevertheless. However, if History repeats itself, meaning, if poor economy will work in favor of the "Challenger", then Romney will be elected. Poetic reversal of roles just 4 years later, isn't it?"...

So it would appear that redefining  how to compute the unemployment rate was enough. I must admit that I overestimated the US Electorate, I truly thought they would see through the numbers manipulation. How can on call someone in the middle of the day in a survey and ask them if they are currently working, and if they say yes, take that for a fact. I mean, it is the middle of the day and you are calling them at home. Grant it, I work from my home office, but you wouldn't get me on the phone on my home phone line during work hours... well that's another story altogether.

Let's do some Monday morning Quarterbacking then. What was it that won the President's reelection? Or better yet, what was it that lost it for the Former Governor of MA? In my humble opinion, the electoral team. The President's Team, led by  David Axelrod, was ruthless from day one, it never stopped. Then didn't pick up from where they left off in 2008, they kept going full speed every single day for the past 4 years. The Campaign Chief oversaw every statement that came out of the White House, he spoke more for the President on important issues than the President himself or even the White House Spokes Person. The Spokesperson's boss, wasn't the President it was Axelrod himself. He's the one who responded to deep probing media questions every time the President was vulnerable, not just in the past year, but even during the first 2 years of the Presidency. Axelrod led a formidable campaign team, ruthless, calculating, extremely knowledgeable of its electorate. He knew everything there was to know about anyone who might even consider a fleeting thought to re-electing the President and his team zeroed in on that voter and never let him/her go, till election day.

Facing that Powerful machine, was the same timorous team that led McCain Campaign all the way to defeat. It seemed that Romney had finally the wind in his back the last few weeks of the campaign, particularly after the very first debate. I thought, that's it, keep up the pressure that way and don't let up till election day. But for some reason, Romney let up, he eased back, didn't bring up the Benghazi fiasco, he was more concern in looking Presidential that pointing out how Un-Presidential Obama had been and was till the last day. Was it over confidence, the fear of appear petty, racist, vindictive? Maybe, but that was a fatal mistake. Pettiness, revengeful and playing the race card didn't bother Obama and his team on bit. At the end, he won and Romney lost. That's one thing Monday Morning Quarterbacking doesn't change: The final score of the game.

So congratulations to David Axelrod for a brilliant Strategy, extreme flexibility and amazing capacity to adapt to the worse possible situation. Mr. Axelrod is extremely savvy and would make one formidable CEO and/or Military General. Congratulations also to President Barrack Obama. Let's pray that he will lead this wonderful country back to greatness. I truly wish this administration the best, for the best of the country. Like it or not, he is the President and the one that must lead. The question is: Will he Lead? He has not done so yet. The good news is, that there are no more re-election goal in the horizon for him, so he will finally be able to stop campaigning and start governing. It took 4 years, but better late than never right? May God bless the President and guide him and his team and may God bless the United States of America. There is trouble ahead and we need a steady hand at the helm to see us through the Super Storm brewing on the horizon.

How Much Do I Need?

Starting A Business

Volume IX

How Much Do I Need ? 

 Here's a subject everyone thinks is a "No-brainer", but is it? That question is more complex that it seems at first thought. Starting a business engenders an investment that encompasses all expenses from the very beginning. The question is: When does it begin? When does the budding Entrepreneur start incurring costs related to the business? There are a few things to take into consideration, like the cost of research and planning your business. The cost to physically establish your business and the cost of launching it. Last but not least, the cost of operating your business on a daily basis. All of these have to be tallied in order to determine how much capital a new business entrepreneur would need to have readily available one way or another.

As soon as you start to seriously consider opening your business, you will need to research your opportunity and start planning by studying the various options available to you. The very first consideration is the market study for your business proposition. The serious entrepreneur will rely on factual information collected from empirical data. Assumptions based on theory lead to misinterpretations which lead to miscalculation and eventually failure to launch at best or bankruptcy in the Launching Phase (first 6 years) at worse. Even if you have the time and the knowledge to do the research and put together the study, you will most likely have to purchase data from various organizations to assist you in that task. Most chamber of Commerce and professional organization offer, for a modicum of a sum, Data collected on a particular sector for a particular market. Those sources bring gravitas to your research as most funding groups, lending institution or equity investors, would require that you provide a reliable source for the data you are using for your projections in your business plan. You will also need to hire the professional services of an accountant or a consulting firm to put together your business plan according to your directives and your business objective. This point is particularly important if you seek funding from a Lending Institution or equity investors. The neutral element of a third party putting together your business plan adds objectivity and therefore additional weight to your proposal.These sum up The Cost of Research and Planning of your future enterprise.


Depending of the nature of your business, the cost of establishment will vary. However, no business will be without a cost. This cost is essentially summed up by tallied the expenses that are valid only that very first year. Some examples of that are the purchase of equipment, the deposits paid for utilities, the cost of operating licenses and permits. Add to that the cost of furniture, fixtures and supplies but do not forget the cost of initial marketing and communication to announce the grand opening or launch of the company. Often forgotten is the cost hiring and training your employees. It generally takes 6 to `12 months before you actually get your team selected and trained sufficiently so the business can operate somewhat smoothly and everyone to be comfortable in their respective role. Those expenses are not repeated on a month to month or year to year basis, so will not be reproduced in the subsequent years. Nevertheless, those are generally bulky expenses and absolutely necessary to the creation of your enterprise. This will allow you to know exactly and in detail what it will cost to physically establish your business.

What remains, is the cost to operate your business on a day to day basis. It is of the utmost importance you know that figure. That is the only way for you to evaluate whether or not your business is productive enough to sustain itself. You need to know how much it costs to keep that door open. Knowing that, you must know what is your profit margin from your gross sales. With that information, you will know what your minimum sales threshold is to keep your doors open. You can break it down on a daily, weekly, monthly or quarterly basis, whichever is more adequate to the nature of your business. That cost must include, the fixed expenses, such as rent, mortgage, interest payments on debt, any regularly scheduled payment that do not change based on your business volume. Add to that the variable expenses, such as Payroll and payroll expenses, taxes, fees, suppliers, transportation and all other expenses necessary to your business and that are not fixed or are set by the volume of business your enterprise produces.  

NOTA BENE:
One important point, I would like to stress is that of payroll for the owners/managers and their working family members. Very often, in small and mid size business, the owners and their working family members occupy one or even multiple positions in the company and do not take a salary for themselves. That is perfectly fine and understandable, one needs to save as much capital as possible to give the company all the chances of survival, particularly in the Launching Phase. It is however the largest mistake they could make. All positions merit a salary. No one works for free. To ignore that cost is to falsify ultimately the balance sheet at the end of the fiscal exercise. The net profit will not be what it should be had each position collected it due salary. That net profit could even transform into a net loss if the proper accounting is done. If the objective is to grow the business, these positions will eventually be filled by someone other that a family member or the owner. When that occurs, the proper salary for that position will have to be computed in the final accountings. So it is important to plan for those salaries even if they are not collected right away. The non collected salaries can be saved in an "Unpaid Salaries" expense account in the accounting journal until such a point where there are funds to pay those salaries, either to the family members or owner who have been performing those tasks or to their successors in those positions. To add those unpaid salaries to the net profit, is not only foolish, since the company will pay taxes on that "false profit" but more importantly, it gives a false picture of the state of the company at the end of the year. It gives a healthier look to the accounts based on fundamentally erroneous data. It is better to plan for the lowest wage for the position in your preliminary budget and then, if need be, increase those wages as the performance of the position holder and the health of the company warrants it. Plan for success and growth. Decline and failure need no planning nor help, they are always just one step behind a major mistep.

With that in mind, you must compute your operating cost for the entire year, add to that your establishing cost, and to that, the cost of research and planning. That will give you an exact figure, the one you need to know before you go to the bank to set it aside from your savings, or borrow from a lending institution or request from your equity partners. 

In conlusion: 

Research and Planning Cost + Physical Establishment Cost + 1 year of operating cost 

= EXACTLY HOW MUCH YOU NEED TO START YOUR BUSINESS

Who Do I Need?

Starting A Business

Volume VIII

Who Do I Need ? 

The Entrepreneur, whether he is the CEO of a Multinational Conglomerate or the owner of the neighborhood coffee shop, should be the only Jack of all trades. As such, he detains enough general knowledge to steer his emerging business through the danger of the business shallows during its launching phase (first 6 years). However he must surround himself with associates, partners and staffers who are at the top of their field. The members of his team must be experts in their narrow field. He, as the leader, must ensure that he gets the best out of them, guiding their skills and abilities expertly, so they all work harmoniously together, for the best of the company. The primary function of the business is to produce a widget or a service, and do so for a profit. So the Production Team must be headed by an expert. The Production team is the "Magic Machine" of the company, its pulsating heart. It needs an input system, to feed it the parts or materials it requires in order to produce the Widget or the Service, and an output system that will deliver it to the market. the Input/Output is the responsibility of The Logistics Team it should be lead by an expert in logistics. Logistics is not just about transport of the goods to the customer, it is also the proper "feeding of the magic machine" with what it requires from the suppliers to enable it to produce what is to be delivered to the market. However, for the customer to select the new company's Widget or service, he needs to know that the company exists and that it produces such Widget or service. That is the purpose of The Communication Team. That is the team who ensure that the company is noticed by its market target, and so, in a positive light. It is the team responsible to tell the potential customer, that the company is now established. It must indicate what is the mission statement of the company, and show what product or service it is offering to the customer. Once the Company is communicating adequately, and that the magic machine is ready to start producing and the Logistics team is ready to deliver, it is time to go out and start transforming the targeted market's consumers  into  existing customers. That function is the purpose of The SalesTeam. That team's role is to ensure that there are orders coming in. Without those, the entire enterprise is at a stand still. Sales are the fuel that keeps the "magic machine" going. These groups are the main components of a well organized company. There are essential to the survival of the company and ultimately its success. Nevertheless, they are not enough. For all of these teams to work well, they need to work together, they need to be paid, to be trained, to be informed of the day to day happenings, they need support, they need to communicate with each other. In other words, they need a central command and control post where all that is common to all of them can be gathered and therefore made accessible to all of them. The central nervous system of the company is the purpose of the Administrative Team. Its role is to support all the others teams.  The CEO, is a Team all by him/herself. He is the Conductor of the Grand Orchestra that is the Enterprise.

The Production Team's task will be more or less complex,depending of which business category your enterprise belongs. If you are a service company, the logistics team will play a lesser role in the proper functionning of the Production team than if you were a manufacturer. However, the quality of the service or Product  output will be largely influenced by the competence of your production team and particularly by the competence of its leader. If you are a small Mom and Pop shop, most likely, as the "CEO" you double as the Production team leader. That is perfectly fine, but keep in mind that cumulating two hats, does not exclude the necessity of fully performing both roles. Too many small business owners fail to keep reports and information flow from one department to another just because, the owner runs 2 or 3 departments and that He/She does not need to tell him/herself what is being done. The error comes from the nearsightedness of that methodology. If the goal is to grow the business to a point where the Head of the Company, can shed a Hat, in this case that of the Production Manager, he/she needs to detach the two distinct roles administratively, so whoever comes after, can follow on the same path and follow the establish track record and methodology. If all is "In The Head of the Boss", no one will be able to alleviate the burden of the Boss. That is often why so many small business owners, risk their health by taking too much on their own shoulders for too long. The lack of proprerly laid out system and work process for each department, and within the department for each position, is a receipe for disaster. Should something happen to the "Boss" the company is left like a headless chicken, flapping its wings aimlessly. The other risk is that of the Owner's chance of reaching a "Burn Out" phase. From the first day, run you company exactly the way you would like it to be run 20 years later, after it reached the size you wish it would.

• If you open a restaurant, and your goal is to have a chain of restaurant according to the same theme, then run that restaurant as if it was the first of many. Start working on the duplicatability of the formula from the very first day. The service method, the mission statement, the ambiance, the food served, the way it is served, the decoration and layout of the restaurant needs to be selected based on the duplicability factor. Every decision should be made with that in mind. (If I serve this dish, will it be successful in another location, will the theme be as popular in another location... etc).
• If you open a manufacture, building Widgets for the consumer, as the CEO you must be the expert Widget builder, if you are not, then you must hire someone who is an expert. You can not afford to have a production team led by someone who's knowledge and skills in the fabrication of your product, is mediocre at best. You need to have from the first day, someone who knows how to make a superior quality widget in the fastest most economical way. So pick your Production team leader carefully and once you have him, ensure that he/she remains on the top of their game by continuously providing training on better methods and new ways to improve production output, and quality of product. To do so, either hire the services of training experts in that field to come to your entreprise or send your production manager regularly to training workshop with the appropriate experts consultants in the field.

The Logistics Team Leader is usually a highly organized individual, able to multitask continuously on several levels. He leads a team that comprises, purchasing any item required by any department in the  company, with the exception maybe, of office supplies, (which come under the responsibility of the Administrative team). His/her team will coordinate the reception of all the incoming goods, materials and supplies for the Production team. They also oversee the shipping of the finished product and its timely delivery to the customer. They negociate with the Suppliers in terms of quantities, price, delivery terms, modes and conditions of payments as well as the scheduling and frequency of delivery and shipping. As a result, this is the team that must communicate with the sales team the quantities still in inventory and available for sale, what is being discontinued or about to be depleted till further notice. They must also communicate with the Administration team, so billing can be synchronized with delivery and as per the terms and conditions agreed with each customer account. It must also communicate with the inventory team, to let them know what is coming and what must be leaving, but also what has been damaged or lost and therefore no longer available for sale.  They must coordinate with the various transportation companies for both the Incoming goods from the suppliers as well as the outgoing goods being delivered and billed on time. Logistics is a key element to the proper functioning of a successful company. Its leader must be an expert advisor to the CEO, a pilar on which many sections of the company lean on for the support needed for their separate tasks.

The Communications Team is the artist that paints the portrait of the company and exposes it to the public. It is also its voice. Anything the public sees or hears of the company, must be approved by the Communication team at least, designed and produced directly by it at most.  Without communication, the company image is left to the allegoric whims of rumor and desinformation put out by competition. If you don't put out a mission statement, if you don't tell the public who you are and what your company does and stands for, someone else will do it for you. Most likely, the image of you put out there by others will be to their advantage and not yours. The market needs will be fulfilled, if not by your company it will by the existing competition or future competition. Just as in the Universe, markets abhor  a vacuum. If there is a need for a product or a service, sooner rather than later, someone will open a business to fulfill that need. If you are such a company, you will need to inform the market that you exist and that you do have the very product or service that is currently needed. Even if you do not have any competition (never assume you do not, rather assume the contrary), your market base must be informed that you exist if you wish to sell your product or your service. The Communication Team's duties go beyond, putting together and implementing a marketing and advertising campaign. Besides, the logo design, the print and other media messaging and branding, it is the voice through which the company communicates with the outside world. Every visible aspect of the company must be under the direct supervision of the Communication's team. The way the products are presented by the Sales Team, the message, the sales pitch, the color of the Buildings, the color scheme of the offices and plants, the type of cars and trucks and their colors, down to the very name of the company, the name of the products and even what the various company representatives say, to whom, when and where. All must be orchestrated by the Communications team, even what the CEO does, wears, says, goes, what he drives in public. It is very similar to what the politicians go through during the Electoral campaigning, and for good reasons. What is electoral campaigning if not a massive branding campaign of a Political figure? Politics immitate business not the other way around.

The Sales Team must be highly effective. Their responsibility is the most demanding, although the most rewarding. Their success will enable everyone else to proceed with their respective task. Consequently their failure will engender the failure of all the other teams  as well. Again, Sales are the oxygen that allows the company to breathe. Without sales, there is no income to speak of, and without income, there is no budget. The entire company grinds to a halt. Sales is the most demanding and the most stressful of all the tasks. Its success depends not only on the top performance of the team members, but also of the top performance of everyone else in the company. The salesperson's sole responsibility is to convince the customer to part with his money in exchange for a product or a service the company will provide. However, the satisfaction of that very customer hinges on not only receiving the product or service, but on receiving it in a timely manner and for the expected quality/price ratio. That involves the logistics team's performance, which is responsible for delivering the product to the customer. It is also the responsibility of the production team to ensure the quality of the product or service is to the satisfaction of the customer. Nevertheless, should any team fail in their responsibility, the sales team will be suffering directly, since their remuneration is often tied directly to the ultimate satisfaction of the customer. All other teams, may share in the bonus plan if things go well, but nobody gets directly penalized in their personal pocket book, if sales go down. Nobody but the sales team members, that is. An account representative is the human face of the company the costumer sees. He/she is the one to whom all the frustrations are vented if the product is not "up to par", he/she is the one who gets the direct call from the angry customer, and he bears the brunt of the assault of the frustrated client. The sales person must be the most prepared, the most informed and the most willing to get out of his comfort zone on a daily basis. Sales are the one task that is not cumulative. Each sales must be built on its own, even a repeat order must be sold somehow, or run the risk to see that order be renewed by the competitor. Customer loyaltly is only valid if there is nothing out there that isn't "better". So constant training, motivating, informing must be the reality of the sales team members. It is one of the most stressful position in the entire enterprise, short of that of the CEO. Not just Sales Management, but even the common account executive position bears an unbalance amount of performance pressure. In many companies, sales position's remuneration is solely on performance basis. Some company offer, basic Salary, but most only allow a "Draw" on commissions. This means that the Income potential of the sales person is directly tied to the sales performance. No sales = No Money in the majority of situations. This alignment of common interest between the Shareholders of the company and the sales people, effectively makes them De facto partners with the owners of the company and ensure their utmost effort in performance. Training and motivation is key. Even the most successful salesperson can use a pep talk once in a while. Most importantly, having someone who is recognized as a very successful person in that field, giving them sales tips and advice on a very pointed situation, particularly a situation that seem, at times hopeless, can be a life saver and often one of the major reason, a downward sales trend is turned around. Therefore, regular, training sessions, seminars, conventions, "Training Vacations Rewards", particularly outside of the Work Environment can be very profitable to a company. Sending your entire sales force on a cruise, or on a trip out of town, all expenses paid, is the perfect opportunity to introduce a new sales promotion, a new line, a new product or any big change. The cost of the travel and lodging is easily offset by the fact that the entire sales force is in one location at the same time, effectively reducing the cost of communication, motivation and training, particularly for a large organization. It also brings down the cost of hiring the services of Professionals Sales Trainers such as Internationally renown Andy Preston, or Tim Robbins or someone of their caliber. Even a Mom and Pop Shop, should attend events such as those. Sales is an integral part of running a business. If your company is a small 2 employee company, chances are you need to attend those training more than anyone else, since one of the hats you are wearing is that of the sales person and Sales Manager. Professionals like Andy Preston, often have seminars open to the public on a regular basis around the wolrd. It is important that the company owner/CEO or Sales Director, have in his/her contact list a number of Professional Training Organizations, who can be called upon for information, training. This  shameless plug-in for Andy Preston is simply because I have the priviledge of knowing Andy personally and can personnally vouch for his professionalism and for the results he produces for sales people. If your sales force is English Speaking, I highly recommend you look up what Andy can offer your company. But, that decision is yours, select Andy or some other organization that you feel best suits your sales training needs, but do not overlook that important aspect of maintaining a healthy team of Sales and Sales support. Their performance is the prelude to the performance of the company as a whole. It starts with them. Do not neglect your sales force.

The Administration Team is the one that fills in the gaps between everyone else. It is the ultimate support team. In fact Administration, can be divided into 2 general sectors:

• The Executive Team, which includes the CEO, oversees all the departments and keeps track of the progress of every team,  monitors their work and efforts and ensures that each team receive all it needs in terms of goods, materials, information, human and capital resources. It guides the progress and leads the Team Leaders. He holds every head of department accoutantable for their actions and the action of their respective team members. He distributes the rewards and the punishments.
• The Monitoring and support team, mostly monitors each department progress or lack thereof, evaluates its needs and processes the administrative requests and all the communication between the department themselves and between the them and the executive team. It is in charge of evaluating  the performances in terms of numbers. It is the team that produces all the data reports necessary for each department to function. It is the Central Intelligence Department of the Organization. All is gathered here. How much each department costs as it functions currently, how much will it cost if a particular situation occurs or doesn't occur. All past performances are evaluated and recorded by this team. All projected performance, are likewise calculated by this team. Compliance with the law in terms of licensing, permitting, tax declaration and payment are the responsibility of this team and its Leader. It manages and monitors the income streams and the expense flows. They are the unceremonious masters of the Cash flow, so vital for any company large or small. 

The Administrative Team Leader, is usually the right hand of the head of the company, second only to the CEO but often on equal footing with the head of Sales and Marketing. Most of the time, the Head of administration is the CFO or the COO depending of the size and structure of the corporate organization. He must be an expert in studying the past and project the future. As an Accountant, he must analyze past financial performances and use them as a solid base to project future expectations  based on the various reports and plans from each department. He is the Key Master of the Information vault of the company. Under the leadership of the CEO, he will give the vital information about each department to their respective leaders, and assist them in setting the course for the upcoming quarter, fiscal year or the next 5 years, based on the information of the past performances or existing Market data. This is the team who keeps track of the Account Receivables pertinent to the Sales team [letting them know if their customers have paid for their last purchase, if they are eligible for a particular discount or if they are barred from ordering for one reason or another]. This team also manages the Accounts Payables pertinent to the Logistics team (helping them manage their suppliers and Freight Forwarders). This support team needs support itself and most often outsources auditing duties to external company as may be required by law for fiscal purposes depending on the State, or Country in which your Company is registered. 

In a SME (Small or Medium Entreprise) the Administrative team is reduced to simple bookeeping and secretarial tasks for lack of resources and the CEO doubles as CFO and/or COO. The need for an outside firm's auditing and accounting services is then even more relevant and highly recommended. It is important that you choose a firm with which you will be comfortable and build a relationship. It takes time for any team to really get to know your way of doing things, your philosophy and where you wish to take your company. Your Accountant, can guide you and help you take it there, while avoiding dangerous and costly financial "Pot holes" on the road. Choose carefully, choose wisely, choose a firm with experience in your field of business and knowledgeable of the laws of the various lands in which you actively do business. I can personally only recommend a few, here, in the US. One of these accounting firm is that of Joseph L Rosenberg CPA. I know Joe personally but I urge you to do your own research. Do your own due dilligence and select your Accounting firm carefully.

Starting up a business, large or small is one of the most challenging task. Give yourself all the chances you can and for all your skills and Knowledge, there'll always be only one of you. So surround yourself with the best expert available to assist you. Either as employees, partners, shareholders and outside consultants. Don't settle for the 2nd or 3rd best, go for the top of the line your resources can afford you. You need Experts in your board of advisors. You should be the only Jack of All Trades :)

Where Should I Establish Myself?

Starting A Business 

Volume VII

Where Should I Establish Myself?

A business should be strategically located where it would be easier for it to conduct business. That being said, there are a few things to seriously consider to determine that location.  A business in general, needs to be able to produce a good or a service  and deliver such to its customer base, in the speediest and most cost efficient way, therefore the choice of the business location is critical. There are several factors that influence the choice of a location over another, and those are not the same for all businesses. For the sake of this argument, I will speak of the most common factors that will influence an executive's choice for a new business location. Generally, the nature of the business plays an important role, so does the market segment being targeted. The local skilled labor pool must also be considered as well as the suppliers, professionals and subcontractors presence in that geographical area. Finally, for logistical reasons, the area's infrastructure in terms of highway, rail, airport, sea/river access for transportation must not be forgotten.

The Nature of the Business: 

• Service sector:  For professionals, consultants and all businesses that offer a service to consumers or businesses, being able to reach that consumer is the most important aspect, since a service can not be shipped. In this case, the main consideration is to be as centrally located as possible, within the very market you are targeting. This way,  you and your staff can go to your customer to perform that service, or your customer can conveniently come to you to receive that service.  
• Wholesale and Retail sector: Retailers, whether we are speaking of big box stores, discount outlets or neighborhood family owned stores, must be close to their customers workplace or residential area, depending of which segment of the population they target and if their goods are affected by the time of the day (i.e: Department stores get more affluence in the evening after 5 PM when people finish their work day and go shopping before going home. Other business cater to business people and workmen and therefore will close around 5 or 6 pm as the work day ends for everyone as well) So Department stores will be located close to residential areas, in outskirts of Large cities, to remain close to their customers as these go home. Space is more available in the suburbs as well, and property cost are usually lower than in city centers.
• Manufacturing sector: Sales territories of Manufacturers are customarily very large, often regional, national or even international. Therefore being close to your customer base geographically is not as important as other factors because if you have to cover the entire globe, you can do it from basically anywhere since it will involve a complex system of logistics. However, local legislation may become an important factor in most cases of large Industrial groups, particularly when it comes to regulation and especially with regards to taxation.

Targeted Market Segment:
Not every business caters to everyone. If you are an agricultural machine or tool manufacturer, you are most likely to make a better choice in a rural area close to the large agricultural states of the Midwest rather than in the middle of Manhattan or Malibu. On the other hand if your business is a high end Designer Salon & Spa, you'd be better located in a larger metropolitan area where you are more likely to get a steady amount of business to fuel you growth.
If you cater mostly to the Elderly, you might choose to open your business in Florida, Southern Texas, New Mexico or Southern California where a rather large portion of the Retired Population elect to reside once they retire. However if your product or service is more geared toward young adults and youth in general, you may wish to set up shop in a State that has a lot of Universities, like Florida, California or New York.

 Skilled Labor Pool:
Manufacturers and Craftsmen must consider the local pool of skilled labor, and do so very carefully. They should ensure after all, that there are people living in the area they are about to choose, with the skills that are required to open such business. You should not want to build a plant or a workshop, only to realize, after the fact, that the skills required to work in your business are sorely lacking from the local population's talent. In that scenario, you would either have to relocate your company or dislocate your employees from wherever it is that you are bringing them.

Suppliers, subcontractors and professional availability:
For the same reason, it is always an advantage to have all the services and goods, your business requires, as close to you as possible. It cuts down on logistical costs and facilitates communication with your suppliers and professional service providers.  The added flexibility that proximity provides can sometimes make a difference in opening an important customer account, or loosing one. 

Infrastructure: 
Last but not least, where you establish yourself must be a area easily accessible in all aspects. Not just from a freight and logistics issue, but also from a human resources point of view. Skilled labor will be more willing to come to work for you, if you are established in a town or city with a superior choice of schools, entertainment, proximity to administrative centers, highway, airports, train station...etc.

Depending on the nature of your business, the city in which you establish your enterprise, may not have any large throughways for freight forwarding. It could be to far from the closest Airport or simply have no hotel accommodation adequate to receive your clients if you need to receive them regularly. Regional Infrastructure can be a very determining factor in your final election of the location.

When Should You Go Into Business?

Starting A Business

Volume VI

When Should You Go Into Business?

We now know who and why one should leave the relative comfort of being an Employee, and venture into the scary  world of Entrepreneurship. We also know what we need and with whom we should go into Business. We know what is the best size to start with, depending on the nature of the business. Another important question is when. If you've recognized yourself in the details of the portrait that are starting to appear within the lines of the Volumes I through V of this Blog Segment, then you know that part of the answer to that question is, when you have reached the ceiling of your professional progression. When working for someone else offers you no upside any longer. If you've reached that impasse, you know that if you wish to keep going up and forward is to go into business on your own. You also know that you have the skills, focus, vision and overall knowledge required to do so. However you still do not know when. Today, tomorrow, next season, next year? Is it a question of timing? If yes, timing with what? So you see, "when" is a complicated question to ask oneself and a complicated question requires a simple answer and that in itself demands deep thought and long consideration. You need to have your capital ready and available. You must know with whom you are going to partner if necessary. You have already identified who is going to work with you, for how much and when they will be available. You have already selected all the equipment you require and know where to find it and when it can be obtained (delivery lead time). You have a clear idea of what materials you need, in what quantity and delivery frequency. You have located the premises where you need to be established, evaluated your logistics requirement and already have planned either the purchase of the transportation equipment or have an estimate and draft contract from a logistics and transport company to respond to your needs. You know what product or service you are going to provide and most importantly you know to whom you should sell. so, if you know all of this, how do you know when to start? It should be easy to now, right? As soon as possible is what comes to mind, but it doesn't really answer the question. When is as soon as possible? What is possible and what is not? The earlier you are completely ready the earlier you may start. So let's see if we can determine when that could be.


Your Capital:

Unless you have the entire sum you will need to sustain your enterprise for the first year, already deposited in a bank account somewhere, you will need to know, how much your funding partners or financial lenders can make available to you, when and under what conditions. You need to know that, so you can plan your launch and immediate development. Most Angel investors and Financial Institutions will not give you a lump sum for you to "blow" it all in a few days of euphoric spending fever. Most likely, you would have included a funding schedule in your Business Plan, detailing chronologically the various phases of your development stage and the funding requirement for each of theses phases. It provides flexibility to both you and your funding associates, which allows for corrective maneuvering in your business navigation as you move along the path of early growth. Some phases may require less or more funding depending on how the market reacts to your input in it (as a consumer for your supplier and as a provider for your customers). Always keep in mind that the Market is a fluid mass of data, ever changing, always variable, influenced by uncounted factors and is thus very very difficult to predict with detail and precision, besides a general direction of a trend, but always surprising at the local level. So stay observant, alert and prepared. That is the definition of flexibility in business. Plan for a specific course of action, but ensure that you have Plan B, C, D...all the way to Z and back. Always be ready to scratch your plans and move in a different direction at full speed without blinking. This applies to all points in business, not just your finances and capital needs. You may have a certain amount of capital you are counting on, and suddenly be faced with a sudden loss of that capital, for whatever reason (bankruptcy of the bank in which funds are deposited, dramatic loss of the value of your securities portfolio if that's where you had your funds invested, inability to sell an asset at the opportune time, because market may have turned against you [i.e: Real Estate Asset]..etc). So ensure that you have the capital needed, have it available to you in quantity and in time as per your projections.

Your Partners:

If you have gone through all the phases described in the first 5 volumes of this series, then you have already determined whether or not you will need financial and equity partners. In the event you do need partners, you've chosen them carefully, you've selected them not only for their funding abilities, but also for their knowledge and skills, as well as for their contacts in the Industry in which you wish to evolve. If at all possible, those contacts should be on the Supply side as well as on the distribution side. If you're going to take someone's money to  put into your adventure, it behooves both of you to take advantage of every asset you both have. This will further increase the chances of success of your company for both of your interests. Equity partners who do not bring in funding, are partners because they, along with you, bring to the table, exceptional know-how, skills thus will occupy an intrinsically valuable position within your organization. Just like your funding partners and your lending institutions would require of you, your equity partners must have "skin in the game" at least as much as you do proportionally to their equity share. Their efforts will be compensated proportionally to their share of equity when all goes well, then they should share in the losses in the same proportion, should the affairs take a negative turn. This will keep them motivated and give them the proper incentive to strive for the success of the enterprise as much as you would. A boat goes faster and smoother if everyone on board, rows in the same direction towards the same goal. On the other hand, your funding partners, even if they are "Silent" partners who do not directly participate in the day to day activity of the company, are not exempt to put in their best efforts. Most likely, those are wealthy individuals. Nobody stays wealthy out of sheer dumb luck. These partners, have a plethora of contacts both in your market as potential customers and among potential suppliers, or service providers. They may have contacts with authorities which is always advantageous to have to speed up administrative processes of permits, licensing... etc. They may have contacts among with the local, regional or even national press, which is always advantageous for Public Relations and Communication purposes. Everyone must pitch in and have its interest directly tied to the success of the Company.


Your Staff, suppliers, providers:

As a start up, you must start with only the absolute essential, the skeleton crew. This is important for many reasons. Theoretical knowledge is good but its value is compounded with actual practical experience. Each of the Staff members, including you and your partners, may have skills, knowledge and even experience in each of your allocated tasks individually, but most likely this is the first time all of you will work together. There is always a required time of adjustment for any team. Everyone must learn to work with the new unfamiliar tools, equipment, unfamiliar surroundings and unfamiliar procedures. Therefore, it is important that everyone is on the "same page". Before the company is launched, you must already have your staff selected. Everyone must be ready to step forward when the time comes. You can not start your business with half of your necessary staff missing because of remaining prior obligations. It is better to postpone the opening of your business until you are sure that everyone needed will be on board and ready for duty, fully committed. The same goes for your suppliers of goods and materials. You must iron out the details of quantities and delivery time, prior to opening your business officially. Most of the time, financial arrangements must me made prior to that date to ensure all is ready in a timely manner. Deposits may have to be made in advance, as well as  licensing, permits and whatever required authorizations are issues that may have to be resolved prior to the actual start of business, that includes, registering of corporation, retaining professional services such as legal counsel and accounting services depending on the nature of your business. You Enterprise may or may not produce income from the very first second it is officially open for business, but it will start costing you from right then and every second of every day thereafter. That is the one constant that is constant to all businesses no matter what sector of industry, market it caters to or country in which it is established. So be sure everyone is ready exactly when you need each and everyone of them, whether they are your staff, your materials or goods suppliers or professional or other service providers. Business is a never ending war for survival, make sure your army is ready for battle from the very first skirmish.

Your Equipment:

Some Businesses do not require any equipment, other than what is now, common to everyone, meaning communication equipment such as Personal Computer, cell phone and very little beyond that. Most consulting businesses fall in that category. Until you have developed it to a scale where you need to hire full time staff, your equipment may be limited to what you already have and use in your private life. Most companies, however require a minimum of equipment. Retail stores, need at least, cash registers, appropriate software, a location opened to the public with sufficient space to display the goods for sale and store the reserve inventory. Make sure you have the proper equipment that will allow you to do your daily tasks with the least amount of effort, time, and cost for the most amount of revenue. Verify that it is the right equipment for what you require and that it is in proper working order.This defines your business' efficiency.  You must also ensure that you and everyone of your staff know how to properly operate all of the equipment or at least the one each staff member is assigned to. The training of your staff on that regard comes before you open for business, before the first customer walks in, if you are in commerce or before your very first order comes in, if you are in the manufacturing sector. This goes back to the same mantra of being as prepared as you can be before the task is undertaken. There is always a certain amount of "on the job" training, but you must minimize it as much as possible by getting your crew all the prior training you can. Errors cost more than time, they may cost an order, or worse a customer. Although you can never eliminate the possibility of human error, you must reduce the eventuality to the minimum chances of occurrence.

Your Location:

There are several reasons why, where you business is located matters.  The 2 most common reason is for logistics on one hand and proximity to your market on the other. If your business caters to the public directly such as a Retail Store, then you must establish yourself where most of your customers will find you easily.  The easiest place to pick is either close to where your customer base lives, or where it works. This nuance is determine by the nature of what you are offering. A baker will better serve his customers if his store is close to where they take most of their meals, which would be home. A Breakfast-Lunch Restaurant, however will be better located where his customers are at the time they need his fare, meaning during their work day, so close to business and other places of work. Nevertheless, some restaurant who only open for dinner, depending on the standard of cuisine it serves may find that close to nightly entertainment centers or high end neighborhoods with mixed activities, (both residential and commercial) may be where they will see most of their customers. If you market your good and services to a broader geographical area than just the local one. If you are a national distributor or an exporter [or both], then proximity to your client base will become irrelevant. In this case, proximity to a logistic center, such as an Airport, a Train Station or Highway may be more important for logistical reasons.  Access to qualified and skilled labor pool may be the determining factor for choosing your location if you are in the manufacturing sector, particularly if your product fabrication is labor intensive. Finally, fiscal incentives may not be a factor all by itself, but certainly a contributing factor in electing your business location. Given equal advantages between two locations, you may chose the municipality, state or even country that will be the most advantageous in terms of regulations, taxes, government attitude toward businesses. So you must have considered your business location very carefully before you decide to open your business. Your hometown may not always be the most suitable. Give it some serious thought before you open. The cost of moving your business is always much more than estimated.

Your Product/Service:

Whether you manufacture a product or are reselling it. Whether you simply provide a service, you must have tested it before you launch the business officially. As you know, nothing is ever exactly as planned. Test your skills, the materials, the tools, the finished product or the way your service is provided in a controlled environment before you do it for a "Live" costumer. Make sure that what you are providing is exactly to your satisfaction and, most importantly to the satisfaction of your eventual customer. Use a sample of population that approximates as much as possible your customer base. Do so using your family and trusted friends, if you cannot afford a professional testing program. A home made test is better than no test at all. Everything is better on paper or in your own head than in the real world. So ensure that your vision of what you are providing is in tune with the "Real World" by testing your product and service.

Your Client/Customer:

Prior to the official opening, or launching or your business. Before you start incurring all the daily expenses of the day to day operating a full blown business, study your client/customer base. Survey it directly. Visit it, communicate with it directly. Make sure you know exactly what they would expect from your product or service. What would satisfy them to such a point that they will repeat their business with you and become loyal. Knowing your market base is important, almost as important as your customer base knowing you before you open. You may be the best manufacturer/supplier of the best product/service in the entire Universe, if no one knows you and your product exist, it is all for naught. Opening your business without communicating your existence and that of your product/service and its future availability to your customers may be one of the costliest exercise in the life of your business and may even ensure that its life is so shorten that it may never take off beyond the first installment of monthly bills. Tell your customers, who you are, what your product is, how much it is compare to your competitors and most importantly, tell them why they should buy that product and why from you and not anybody else. Do it and do it before you are officially open, you can not afford to wait for the sales to come on their own, you must sale as much in advance as it is reasonable to do without harming your reputation by overselling sooner than you can deliver the orders.


So you see now, that choosing when to open your business is almost as important as deciding what type of business to open. Misjudging when can be so costly that your business may fail before it has a chance to live to take its first breath, being essentially aborted right when it is ready to step into its intended market. You must open your Business, whichever type of business it is, exactly when... ALL YOUR DUCKS ARE IN A ROW. Exactly when you have made sure that you and everyone and everything around you and your business is ready. Not a second before. Success in business is difficult enough as it is. You do not want to open timidly, blindly, unprepared, unassisted, and empty handed. Make sure that you hold as many cards as you can possibly hold before you enter the game and be ever alert. Business is war and war kills. Your goal is to be as agile, strong and alert as you can so you can survive the journey until you exit according to your strategy.