How many units of stuff—say, how many ham sandwiches, iPhone apps, or hours of consulting services—must you sell in order to cover your costs?
A break-even analysis is a key part of any good business plan. It can also be helpful even before you decide to write a business plan, when you're trying to figure out if an idea is worth pursuing. Long after your company is up and running, it can remain helpful as a way to figure out the best pricing structure for your products.
It sounds complicated, but it's not. Basically, a break-even analysis lets you know how many units of stuff—say, how many ham sandwiches, iPhone apps, or hours of consulting services—you must sell in order to cover your costs.
You'll need several basic pieces of information:
• Fixed costs per month
• Variable costs per unit
• Average price per unit
Performing a Break-Even Analysis: Fixed Costs
Fixed costs are ones like rent and administrative payroll that don't change much from month to month, regardless of how many units you sell. SCORE lists many common fixed costs.
"Be sure to include everything," says Jerry Chautin, a volunteer SCORE business mentor in Atlanta and Sarasota, Florida. "People forget about things like deposits or contingency funds, which can add up to a sizable amount."
If you're creating a business from scratch, don't rely on guesswork to estimate your costs. Chautin suggests asking the utility company for the past year of bills for your location. Call an insurance broker for a real quote for your particular business. Check with trade associations or web sites such as www.bizstats.com for information on average costs in your particular industry.
Performing a Break-Even Analysis: Variable Costs
Variable costs are ones like inventory, shipping and sales commissions that rise or fall with your sales volume. As with fixed costs, talk to trade associations, vendors and even other business owners in your field to come up with the most accurate estimate.
"Look up the financials of public companies in your industry: 10-Ks, which are annual disclosures, or 10-Qs, which are quarterly," Chautin says. "Even though those companies are much larger, you can size it down. The ratios are not going to be that far off."
Performing a Break-Even Analysis: Pricing
This is the trickiest of your three pieces of data, since you're able to choose exactly where to set your prices. Start by looking at your competition, and how they price their products. You can also do informal focus groups to see what people might be willing to pay for your wares or services.
"You can look at pricing many different ways," says Gwendolyn Wright, a small business coach with The Wright Consultants in San Francisco. "How's your competition pricing it? Do you want to be at the midpoint, higher end, or lower end? I see people pricing earrings at three times what their competitors are charging. Why would anyone buy that?"
You'll also need to consider your costs when setting prices. If you spend $2 on meat and condiments to produce a hamburger, you'll obviously need to price it at more than $2. But how much more—$4? $5? $7? That's where a break-even analysis can come in handy.
Performing a Break-Even Analysis: The Formula
Once you've got your cost data and a target price, plug them in to this formula:
BEQ = Fixed costs / (Average price per unit – average cost per unit)
This will tell you your break-even quantity (BEQ), the number of units you need to sell to cover your costs. Any sales above that are pure profit. Anything below means you're losing money.
Here's an example. Suppose you're turning a jewelry-making hobby into a business. You have $1,000 per month of fixed costs (studio rent, utilities, equipment, etc.). Your variable costs for each necklace are $50 for materials and labor. You'd like to charge $70 per necklace, since that's what similar pieces are selling for.
BEQ = $1000 / ($70 – $50) = $1000 / $20 = 50
That means you'd need to sell 50 necklaces a month at $70 each in order to break even.
Use your break-even formula to compare different pricing strategies. For instance, if you raised the price to $80, you'd only need to sell 33 necklaces—but it might be harder to attract buyers.
On the other hand, if you lowered the price to $60, you'd attract bargain shoppers—but would need to sell 100 necklaces to break even.
The break-even formula can help you compare different cost structures as well as prices. For instance, suppose you used less expensive materials in your necklaces and pared the unit cost down to $45. The formula tells you that you'd have to sell just 66 necklaces at $60 to break even.
You can use a basic Excel spreadsheet to run different break-even scenarios, or download one of many break-even templates available online.
http://www.inc.com/guides/2010/12/how-to-perform-a-break-even-analysis.html
12/15/10
How to Get Employees to Care as Much as You Do
Ken Blanchard, author of The One Minute Manager, explains how Southwest Airlines sold workers on its business mission.
To build a valuable company you can walk away from—whether by selling it or just to leave for a vacation—requires that you figure out how to get your employees to care as much as you do.
For advice on the matter, I spoke with Ken Blanchard, whose books, including Raving Fans and The One Minute Manager, have sold more than 13 million copies worldwide.
Blanchard, who is about to release a book about Southwest Airlines with president emeritus Colleen Barrett, started our conversation by explaining how Southwest gets employees to care:
Blanchard: Southwest has posted a profit in each of the last 37 years—a time when the entire airline industry in the United States has posted a net loss. They have a truly special culture.
A friend of mine recently flew Southwest and told me about a flight attendant who came on the PA system to explain that the crew were tired and didn’t have the energy to come through the aisles to pass around the peanuts. Instead, she explained that she would leave a pile of peanut packages loose at the front of the plane and that when the plane takes off, she went on, the peanuts will start sliding down the aisle and passengers could reach out and grab a pack for themselves.
True to her word, the plane began to taxi, gather speed and, as the front wheels came off the ground, the peanuts started to slide to the rear of the plane. The cabin erupted in laughter as virtually everyone inside appreciated the flight attendant’s touch of humor.
There was one person who took offense to the stunt and wrote a letter to complain about the breach in safety protocol.
Normally when the head of an airline gets a complaint letter, someone in their office sends the obligatory form letter back explaining that they will look into the matter and include a coupon for an upcoming flight.
Barrett wrote a letter that simply said, “We’ll miss you.”
The implication is clear: at Southwest, one of their values is to operate with a sense of humor, and Barrett was not going to reprimand or criticize an employee for living the Southwest culture.
Warrillow: I think most CEOs would have tried to win the customer back.
Blanchard: Maybe, but at Southwest, they consider their first, and most important, customer the people who work at Southwest. The second most important customer group is the people who fly in their planes, and the third most important group are the shareholders.
Warrillow: Is getting employees to care really that simple?
Blanchard: It starts with making employees your most important customer, but you must also have a compelling vision. At Southwest, they’re on a mission to democratize air travel. When they first started, the only people who could fly were relatively wealthy businesspeople, and Herb Kelleher‘s vision was to offer everyone the chance to visit a friend or relative during a happy and a sad time. That’s a vision employees can get excited about.
If you ask a Southwest employee what business they’re in, they’ll tell you they are in the customer service business and they happen to fly airplanes.
Warrillow: What else did Barrett do to get her employees motivated to serve customers?
Blanchard: Southwest employees’ behavior is guided by four operating values. Firstly, safety is at the top of the list for obvious reasons. Second is to operate with a “warrior's spirit,” which is to say if you are going to do something, do it better than anyone else. Southwest can turn around a plane in 10 minutes—better than anyone else—because everyone pitches in; even the captain helps pick up trash to turn the plane around faster. Their third value is to operate with a fun-loving spirit, which explains stunts like the flight attendant with the unique peanut distribution strategy. Their fourth value is to have a “servant’s heart.”
Warrillow: What exactly does it mean to have a “servant’s heart”?
Blanchard: The typical organization is a pyramid with the boss at the top and a group of employees underneath. At Southwest, they flip the pyramid over so that the boss is there to help the leadership team succeed, and in turn, the leaders are there to help the front line succeed. It is exactly the opposite of most other companies.
Max De Pree, former CEO and chairman of Herman Miller, used to say his job was similar to that of a 3rd grade teacher: just keep saying the vision and values over and over again.
At my company, we have 300 employees spread across offices all over the world, and I send them all a voicemail each morning with a message from me about why our work is important and a reminder about one of our values. I call myself our company’s “chief spiritual officer.”
http://www.inc.com/articles/2010/12/ken-blanchard-on-getting-employees-to-care.html
To build a valuable company you can walk away from—whether by selling it or just to leave for a vacation—requires that you figure out how to get your employees to care as much as you do.
For advice on the matter, I spoke with Ken Blanchard, whose books, including Raving Fans and The One Minute Manager, have sold more than 13 million copies worldwide.
Blanchard, who is about to release a book about Southwest Airlines with president emeritus Colleen Barrett, started our conversation by explaining how Southwest gets employees to care:
Blanchard: Southwest has posted a profit in each of the last 37 years—a time when the entire airline industry in the United States has posted a net loss. They have a truly special culture.
A friend of mine recently flew Southwest and told me about a flight attendant who came on the PA system to explain that the crew were tired and didn’t have the energy to come through the aisles to pass around the peanuts. Instead, she explained that she would leave a pile of peanut packages loose at the front of the plane and that when the plane takes off, she went on, the peanuts will start sliding down the aisle and passengers could reach out and grab a pack for themselves.
True to her word, the plane began to taxi, gather speed and, as the front wheels came off the ground, the peanuts started to slide to the rear of the plane. The cabin erupted in laughter as virtually everyone inside appreciated the flight attendant’s touch of humor.
There was one person who took offense to the stunt and wrote a letter to complain about the breach in safety protocol.
Normally when the head of an airline gets a complaint letter, someone in their office sends the obligatory form letter back explaining that they will look into the matter and include a coupon for an upcoming flight.
Barrett wrote a letter that simply said, “We’ll miss you.”
The implication is clear: at Southwest, one of their values is to operate with a sense of humor, and Barrett was not going to reprimand or criticize an employee for living the Southwest culture.
Warrillow: I think most CEOs would have tried to win the customer back.
Blanchard: Maybe, but at Southwest, they consider their first, and most important, customer the people who work at Southwest. The second most important customer group is the people who fly in their planes, and the third most important group are the shareholders.
Warrillow: Is getting employees to care really that simple?
Blanchard: It starts with making employees your most important customer, but you must also have a compelling vision. At Southwest, they’re on a mission to democratize air travel. When they first started, the only people who could fly were relatively wealthy businesspeople, and Herb Kelleher‘s vision was to offer everyone the chance to visit a friend or relative during a happy and a sad time. That’s a vision employees can get excited about.
If you ask a Southwest employee what business they’re in, they’ll tell you they are in the customer service business and they happen to fly airplanes.
Warrillow: What else did Barrett do to get her employees motivated to serve customers?
Blanchard: Southwest employees’ behavior is guided by four operating values. Firstly, safety is at the top of the list for obvious reasons. Second is to operate with a “warrior's spirit,” which is to say if you are going to do something, do it better than anyone else. Southwest can turn around a plane in 10 minutes—better than anyone else—because everyone pitches in; even the captain helps pick up trash to turn the plane around faster. Their third value is to operate with a fun-loving spirit, which explains stunts like the flight attendant with the unique peanut distribution strategy. Their fourth value is to have a “servant’s heart.”
Warrillow: What exactly does it mean to have a “servant’s heart”?
Blanchard: The typical organization is a pyramid with the boss at the top and a group of employees underneath. At Southwest, they flip the pyramid over so that the boss is there to help the leadership team succeed, and in turn, the leaders are there to help the front line succeed. It is exactly the opposite of most other companies.
Max De Pree, former CEO and chairman of Herman Miller, used to say his job was similar to that of a 3rd grade teacher: just keep saying the vision and values over and over again.
At my company, we have 300 employees spread across offices all over the world, and I send them all a voicemail each morning with a message from me about why our work is important and a reminder about one of our values. I call myself our company’s “chief spiritual officer.”
http://www.inc.com/articles/2010/12/ken-blanchard-on-getting-employees-to-care.html
12/14/10
How to Get Feedback From Employees
That suggestions box? Ditch it in favor of savvier methods for getting workers to open up.
No employee wants to be just a faceless cog. No matter how big or small your organization is, employees who don't feel like they have a voice can drain the oxygen out of other employees, lower productivity rates, and even cause increased turnover. Employees who feel voiceless are more likely to be a drag on the day-to-day mood around the office.
Like a good therapy session, giving workers of all levels a chance to express their thoughts on the direction of the company has the opposite effect: Show your employees you're interested in their opinions and they'll be more likely take a personal stake in the business. They'll go from feeling like they're working for the man to feeling like they're a part of the team.
"We don't recruit engaged employees. Engaged employees are created," says Lisa Wojtkowiak, client relationship manager with the Opinion Research Corporation, part of Infogroup. "It's our job to engage our employees from Day One."
In the old days, soliciting feedback from your employees meant putting a box marked "suggestions" next to the water cooler. Now, smart companies realize that, as they become more reliant on a knowledge-based economy, they need to engage their employees on a much more detailed level.
Getting Employee Feedback: The Issues to Target
Every method of gathering employee feedback depends on what challenges you need to address as a business. Consider: Is your employee base growing or downsizing? Are you preparing for a merger or staying level?
Professionals in the industry of employee research say offering general feedback opportunities are important — open-office policies or meeting with managers — but specific targeting of issues can help guide your company through difficult times.
Common questions managers seek input on include: how engaged are my employees? How satisfied are they working for the company? What is the communication like with management? Do they have the right tools to do the job? How secure do they feel in the job?
You can also use a survey to find out the demographics of your work force, such as age and gender, and to look for reasons for high turnover.
"You don't do business without employees," says Howard Deutsch, CEO of Quantisoft, a survey and consulting company based in Monroe Township, New Jersey. "Those who are highly engaged or motivated will be better at their job."
Gerry McDonough, CEO of LeadFirst, a Charlotte, North Carolina-based partner of data collection firm WorldAPP, that provides survey design and employee engagement consulting, says asking about the culture of the organization is important. The culture is "upstream" of issues like employee satisfaction and engagement, meaning the answers workers give about their coworkers and the general office environment often directly affect their job satisfaction.
The culture questions can affect your core mission statement too: is it a set of values your employees support?
Getting Employee Feedback: Conducting Employee Surveys
Conducting a full-scale employee survey is still the most recommended method for gaining actionable employee feedback. Professionals recommend doing surveys on a regular basis, but say you shouldn't do it any more often than once a year because employees could lose interest if pressed for feedback too often.
Although it's recommended to tailor the specific questions to your company's current issues, though a common thred that most surveys seek to discover is how connected the employee feels to the company. Most surveys will inquire as to the whether the employee has a good work-life balance, whether they are proud to work for the organization and how much effort they put into their work. Questions can also be tailored to find out how long the employee plans to stay with the company or what their feelings are about health and safety issues.
"We have a lot of clients, and every single questionnaire is different," Wojtkowiak says.
Professionals say a mix of quantitative questions — asking employees to rate their satisfaction on a five-point scale, for instance — should be mixed with open-ended questions to gain a mix of anecdotal and statistical information.
As for length, experts say a survey with between 35 and 55 questions is the ideal length, and it should take no more than 15 to 25 minutes to complete.
"You want to make sure you have enough information so you can make good judgments based on good data," Wojtkowiak says.
If you want to conduct an employee survey more than once a year, she recommends trying a six-month "pulse" survey, a short four-to-10 questions of inquiry, usually based around measuring the impact of changes made based on feedback during the larger customer survey.
Companies should allow time for employees to complete the survey on the clock. It also helps to do the survey when the calendar is more likely to be clear: Avoiding the holidays or even your company's open enrollment period helps workers focus on their feedback.
Getting Employee Feedback: Using Other Methods of Information Gathering
Just because a comment box is one of the oldest forms of employee feedback doesn't mean it might not be useful for your business. Although it feels a little cold, and, frankly, antique, Wojtkowiak says keeping a suggestion box is an easy way to let employees know you're interested in their opinion outside annual surveys. Town hall-style meetings and other group events that place management in front of workers are also becoming popular with companies. Or, consider an online portal where employees can send an anonymous note or post. Employee feedback can also be worked in from Day One. Wojtkowiak says successful organizations incorporate the need for employee feedback options and open communications in their training programs.
"If you're retaining your most valuable staff, you're really taking those best practices from those highly engaged employees and applying them down the road," she says.
•Anonymity. If employees can be assured their responses won't lead to any retribution, they are much more likely to give honest answers, Deutsch says.
•Proving access. Online surveys are considered the most efficient, but you'll need to make sure everyone in the company has access to a computer. This can be done by setting up a dedicated computer station in the human resources office or by scheduling time for certain workers to use a computer terminal.
•Encouragement from management. A successful push for employee engagement has to be believable. That's why experts say if you really want to hear from your employees, you should have your top bosses encourage feedback on a regular basis or send out reminders. "The response rate really depends on how much senior management gets behind the project," says Josh Greenberg, president of AlphaMeasure, a research firm based in Boulder, Colorado, that has worked for Little Debbie snacks and the Canadian Red Cross.
•Incentives. While experts discourage companies from offering direct incentives to individual employees who participate in feedback opportunities, other methods are available. Greenberg says some businesses will offer a raffle prize for something like an iPod nano. Others will offer to donate money to a charity if their surveys reach a certain response rate.
Getting Employee Feedback: Using the Feedback
The worst thing for a company is to go to great lengths to solicit employee feedback, and then do nothing with it.
"If you're going to collect all this data and then not close the loop back to the employees it almost makes sense not to do the survey," Greenberg says. "It's important to let them know that they've been heard."
This can be achieved by sharing at least some of the results with the whole organization and setting benchmarks for improvement. Some companies will set up a goals monitoring system either online or on an office white board tracking efforts at reaching those goals so employees can be reminded of the progress.
Gerry McDonough, of LeadFirst, recommends companies split feedback into two categories: the broad issues that need to be addressed on a corporate or high management level and the narrow issues that can be addressed at a departmental or division level.
The shorter "pulse" surveys can also be conducted throughout the year to gauge progress. Wojtkowiak says matching the results to the hierarchy of your organization is important, to differentiate between the engagement of employees in an office in Kentucky versus one in Iowa.
"Don't put everybody in the same bucket," she says.
http://www.inc.com/guides/2010/08/how-to-get-feedback-from-employees.html
No employee wants to be just a faceless cog. No matter how big or small your organization is, employees who don't feel like they have a voice can drain the oxygen out of other employees, lower productivity rates, and even cause increased turnover. Employees who feel voiceless are more likely to be a drag on the day-to-day mood around the office.
Like a good therapy session, giving workers of all levels a chance to express their thoughts on the direction of the company has the opposite effect: Show your employees you're interested in their opinions and they'll be more likely take a personal stake in the business. They'll go from feeling like they're working for the man to feeling like they're a part of the team.
"We don't recruit engaged employees. Engaged employees are created," says Lisa Wojtkowiak, client relationship manager with the Opinion Research Corporation, part of Infogroup. "It's our job to engage our employees from Day One."
In the old days, soliciting feedback from your employees meant putting a box marked "suggestions" next to the water cooler. Now, smart companies realize that, as they become more reliant on a knowledge-based economy, they need to engage their employees on a much more detailed level.
Getting Employee Feedback: The Issues to Target
Every method of gathering employee feedback depends on what challenges you need to address as a business. Consider: Is your employee base growing or downsizing? Are you preparing for a merger or staying level?
Professionals in the industry of employee research say offering general feedback opportunities are important — open-office policies or meeting with managers — but specific targeting of issues can help guide your company through difficult times.
Common questions managers seek input on include: how engaged are my employees? How satisfied are they working for the company? What is the communication like with management? Do they have the right tools to do the job? How secure do they feel in the job?
You can also use a survey to find out the demographics of your work force, such as age and gender, and to look for reasons for high turnover.
"You don't do business without employees," says Howard Deutsch, CEO of Quantisoft, a survey and consulting company based in Monroe Township, New Jersey. "Those who are highly engaged or motivated will be better at their job."
Gerry McDonough, CEO of LeadFirst, a Charlotte, North Carolina-based partner of data collection firm WorldAPP, that provides survey design and employee engagement consulting, says asking about the culture of the organization is important. The culture is "upstream" of issues like employee satisfaction and engagement, meaning the answers workers give about their coworkers and the general office environment often directly affect their job satisfaction.
The culture questions can affect your core mission statement too: is it a set of values your employees support?
Getting Employee Feedback: Conducting Employee Surveys
Conducting a full-scale employee survey is still the most recommended method for gaining actionable employee feedback. Professionals recommend doing surveys on a regular basis, but say you shouldn't do it any more often than once a year because employees could lose interest if pressed for feedback too often.
Although it's recommended to tailor the specific questions to your company's current issues, though a common thred that most surveys seek to discover is how connected the employee feels to the company. Most surveys will inquire as to the whether the employee has a good work-life balance, whether they are proud to work for the organization and how much effort they put into their work. Questions can also be tailored to find out how long the employee plans to stay with the company or what their feelings are about health and safety issues.
"We have a lot of clients, and every single questionnaire is different," Wojtkowiak says.
Professionals say a mix of quantitative questions — asking employees to rate their satisfaction on a five-point scale, for instance — should be mixed with open-ended questions to gain a mix of anecdotal and statistical information.
As for length, experts say a survey with between 35 and 55 questions is the ideal length, and it should take no more than 15 to 25 minutes to complete.
"You want to make sure you have enough information so you can make good judgments based on good data," Wojtkowiak says.
If you want to conduct an employee survey more than once a year, she recommends trying a six-month "pulse" survey, a short four-to-10 questions of inquiry, usually based around measuring the impact of changes made based on feedback during the larger customer survey.
Companies should allow time for employees to complete the survey on the clock. It also helps to do the survey when the calendar is more likely to be clear: Avoiding the holidays or even your company's open enrollment period helps workers focus on their feedback.
Getting Employee Feedback: Using Other Methods of Information Gathering
Just because a comment box is one of the oldest forms of employee feedback doesn't mean it might not be useful for your business. Although it feels a little cold, and, frankly, antique, Wojtkowiak says keeping a suggestion box is an easy way to let employees know you're interested in their opinion outside annual surveys. Town hall-style meetings and other group events that place management in front of workers are also becoming popular with companies. Or, consider an online portal where employees can send an anonymous note or post. Employee feedback can also be worked in from Day One. Wojtkowiak says successful organizations incorporate the need for employee feedback options and open communications in their training programs.
"If you're retaining your most valuable staff, you're really taking those best practices from those highly engaged employees and applying them down the road," she says.
Getting Employee Feedback: Ensuring Participation
Typically employee surveys get a 70 to 90 percent response rate, but experts recommend several ways to ensure strong participation.•Anonymity. If employees can be assured their responses won't lead to any retribution, they are much more likely to give honest answers, Deutsch says.
•Proving access. Online surveys are considered the most efficient, but you'll need to make sure everyone in the company has access to a computer. This can be done by setting up a dedicated computer station in the human resources office or by scheduling time for certain workers to use a computer terminal.
•Encouragement from management. A successful push for employee engagement has to be believable. That's why experts say if you really want to hear from your employees, you should have your top bosses encourage feedback on a regular basis or send out reminders. "The response rate really depends on how much senior management gets behind the project," says Josh Greenberg, president of AlphaMeasure, a research firm based in Boulder, Colorado, that has worked for Little Debbie snacks and the Canadian Red Cross.
•Incentives. While experts discourage companies from offering direct incentives to individual employees who participate in feedback opportunities, other methods are available. Greenberg says some businesses will offer a raffle prize for something like an iPod nano. Others will offer to donate money to a charity if their surveys reach a certain response rate.
Getting Employee Feedback: Using the Feedback
The worst thing for a company is to go to great lengths to solicit employee feedback, and then do nothing with it.
"If you're going to collect all this data and then not close the loop back to the employees it almost makes sense not to do the survey," Greenberg says. "It's important to let them know that they've been heard."
This can be achieved by sharing at least some of the results with the whole organization and setting benchmarks for improvement. Some companies will set up a goals monitoring system either online or on an office white board tracking efforts at reaching those goals so employees can be reminded of the progress.
Gerry McDonough, of LeadFirst, recommends companies split feedback into two categories: the broad issues that need to be addressed on a corporate or high management level and the narrow issues that can be addressed at a departmental or division level.
The shorter "pulse" surveys can also be conducted throughout the year to gauge progress. Wojtkowiak says matching the results to the hierarchy of your organization is important, to differentiate between the engagement of employees in an office in Kentucky versus one in Iowa.
"Don't put everybody in the same bucket," she says.
http://www.inc.com/guides/2010/08/how-to-get-feedback-from-employees.html
How to Promote From Within
Establish a company culture that nurtures talent and promotes high-performing employees on the basis of merit.
Many people in the workforce have experienced the feeling of being stuck in the same position far longer than the proclivity of their interests and ambitions. This often leads to a general feeling of angst regarding their job, causing employees to seek out another company for more challenging prospects. Consequently, this works against business owners who will lose a high-performing employee in the process. Instead of watching as their talent pool slowly dwindles, employers are better off establishing a company culture of promoting from within.
"It's important for companies to promote from within. Otherwise, there's no career path for the people there and it forces [employees] to constantly be job hunting because they know they're not going anywhere in that company," says Penelope Trunk, founder of Brazen Careerist, a networking hub for young professionals.
While leadership development programs are great for identifying existing talent within your ranks, it's also a good idea for business owners to establish an overall company culture of promoting from within. The following will provide steps, examples, and advice for advancing your high-performing employees into positions within the company that are commensurate with their talent.
How to Promote From Within: Hire Right the First Time Around
Craigslist may be cheap and tempting, but it's not necessarily the best way to go if your long-term goal is to promote from within.
"Spend the necessary amount of money on recruiting because you're stuck with who you're recruiting if you promote from within," says Trunk.
Headhunters, established networking events, online networks, and word of mouth recommendations can lead to reputable prospects in lieu of blind ad posting. However, no matter what method you choose to line up an employee, their performance is ultimately what matters most. Luke Holden, co-owner of Luke's Lobster, shifted several of his employees that began in food preparation positions into managerial positions over the course of the company's first year, including his general managers and director of catering and special events. "We haven't necessarily gone in the direction of finding someone that has a ton of previous experience, but rather hiring good, smart people that want to learn and achieve."
Ooshma Garg, formerly of Anapata and founder and CEO of Gooble, an online marketplace for home cooked food, has implemented an eight to ten week trial-to-hire strategy. "When I meet someone who I think will be a great fit for our company, I'll meet with them and if we decide that we want to try out this relationship, we'll set a certain project for them with a completion date that is typically eight to ten weeks away (our trial periods are always eight to ten weeks) and a set deliverable," she says. The deliverable will be a metric and will vary depending on the position. "For instance, if I were to hire someone on the marketing end or the sales end, I would say, 'this metric is that in eight to ten weeks, you'll bring 250 new chefs to the Gobble network,'" Garg explains. For a more technical position, the metric may be for a developer to improve upon or to create a program within the Gobble infrastructure. During the trial period, Gooble provides class credit for candidates who are students, and a stipend for those who are not.
"When I haven't followed this method, I can definitely see the difference, see the problems that occur when you put someone into a role without having worked with them before and without having developed them from day one," says Garg.
Once you have the right people onboard, how can you make sure that your employees move up accordingly?
How to Promote From Within: Make Your Employees Take Risks
Trial and error is a great learning process for everyone, and your employees aren't exempt from occasional failure. However, it's how they handle new tasks that will show you what they're made of, and if they have the potential to take on an increasing number of responsibilities. Advises Trunk, "sometimes when you're training someone to be promoted, you should give them work that they've never done before, and they'll mess it up. But the company culture has to respect that people who are learning mess up, and that's okay as long as they're learning."
How should a manager go about allowing an employee to botch a task? Trunk states that if you're managing an employee closely, you should be able to identify the exact area the employee will miscalculate. "If you know where they're going to fail, you can catch them before they do any damage," says Trunk. "You can say, 'well, you did this wrong and here's the thing that you should ask next time.'" She says that a good manager can manage all failure so that it's a learning experience.
In this case, a manager can decide indendently how much time they want to invest in helping the employee during the trial and error process. Based on the needs of the company, a manager may want to continue training an employee or, after a sufficient period, opt to promote someone else or hire an external candidate. At that point "it's a cost benefit analysis," says Trunk.
How to Promote From Within: If An Employee Wants More Responsibility, Give it to Them
Natalie Reinert started out as a merchandise hostess at Walt Disney World Resort in 2005. Desiring more responsbility, she took matters into her own hands. "I went to my leadership and told them I would like to move up, and they agreed I could do that," she says. Six months later, she became a coordinator. After informing her area leader that leadership (the lingo for management at Disney) was her ultimate goal, Reinert was assigned a mentor from the leadership casting team. She was then given a breadth of challenging tasks that included tracking the financial data in her assigned store, working with other departments to determine shelf inventory, and creating an efficient system to track customer orders. Leading up to her leadership assessment, "I mock interviewed with at least a dozen managers from across the park who volunteered their time to work with me," says Reinert. She became a retail guest service manager in 2008.
However, some people have remained in entry-level positions through their entire time with Disney, lacking the initiative to advance into positions that require additional levels of responsibility. Disney is a large conglomerate organization that requires an abundance of personnel. However, smaller companies or businesses in general that want to make sure their staff is working to the fullest extent of its potential can choose to adopt an "up or out" policy.
"An up or out culture tends to make people higher performers," says Trunk. "If I start seeing that [my employees are] not going to grow at my company, I try to counsel them about what they should be doing and where they would grow. Really, any good manager shouldn't have to fire someone. They should be making it totally clear that this isn't the right job for them and that person should want to leave anyway. The term is called counseling out as opposed to promoting from within."
Garg takes a different approach with respect to challenging her employees. She requires that they create a specific set of goals for themselves prior to being hired. During her initial meeting with a prospective employee prior to the commencement of their trial-to-hire period, she gives them a survey in which they are required to list three goals that they would like to achieve during their working relationship with Gobble, which do not have to relate directly to the position for which they are being hired. "What do they want to learn about? Do they want to learn how start-ups get customers? Do they want to learn about how start-ups do accounting? It doesn't necessarily have to relate to their role, but I want to make sure that they're developing themselves personally as well as professionally," she says. Those goals are later reassessed every quarter, along with performance evaluations as per their duties with Gobble. Garg credits this method for allowing her staff to visualize their goals. "I think that's helped people achieve their goals and, thus, take on more responsibilites almost consistently every three months," she says. "I am promoting them by using their own goals and their own chosen deliverables."
How to Promote From Within: Value the Teaching Experience
Managers are referred to leaders at Disney "because it's about finding talent and teaching," says Reinert. "A big part of your job is teaching."
When Reinert first notified her superiors that she desired to advance into the position of coordinator, the company provided her with a binder filled with information, including the classes that she could take through Disney University and other management in various Disney support offices that she should meet with in order to better understand the chain of command.
"The only way to get someone to the next level is to have very strong coaching and very strong mentoring. If you don't reward people for good mentoring, then people aren't going to get the mentoring they need to be promoted," states Trunk.
For a smaller businesses, it is essential that management offer creative and cost-effective ways for employees to reap the benefits of on the job education. Presently, Gobble employs between five to ten people, which includes full-time and part-time workers, as well as interns. Garg has adopted an inclusive culture within her start-up so that employees can both learn and grow simultaneously.
"As much as I can, I leave meetings and events open that I am invited to for our employees to attend. So, if I'm meeting with an investor and an employee's personal goal is to one day start their own company or to understand how founders communicate or how founders fundraise, I will do my best to try and include them in one or more meetings that investors may consent to," she explains.
Garg is well aware of the apprehension that some of her associates may feel when it comes to including their staff in the intimate details of company operations, but she has found that many of those fears are misdirected. "Some founders might be afraid that involving employees in so many events or meetings may encourage them to leave or find other job opportunities or find other interests," she says. "But what I find is that it absolutely increases their loyalty to you and to the company because they understand that you care about them and not just their work."
How to Promote From Within: Be Open and Encourage Feedback
Do your employees feel comfortable talking to you? This may be a great indicator of your company's future success when it comes to promoting from within. Managers should be open to evaluation in the same way they allow their employees to be evaluated.
"I think it's important to consistently get feedback from your teammates; constantly culling your teammates to ask how their job is going, how you're doing your job, how you can do it better, the good things you're doing, constantly getting 360 feedback," says Holden.
Stacey Thomson, public relations manager at Disney Institute, the external training division for all of the Walt Disney Companies, believes that companies should institute open door policies that extend to both private and professional matters. "If you truly have that open door policy, then they're going to feel comfortable coming to you and saying, you know, 'I saw this position posted in XYZ division of the company and I'd really like to put my name in the hat for that,'" she says.
As with family, a close knit team may not be able to imagine the loss of high-performing employees that have become essential to the fabric of their department. However, Thomson stresses that, although those employees may be doing a great job, your best bet is to promote them into a position where they can do a better one.
"In reality, those employees will probably leave on their own if you don't encourage them."
http://www.inc.com/guides/2010/12/how-to-promote-from-within.html
Many people in the workforce have experienced the feeling of being stuck in the same position far longer than the proclivity of their interests and ambitions. This often leads to a general feeling of angst regarding their job, causing employees to seek out another company for more challenging prospects. Consequently, this works against business owners who will lose a high-performing employee in the process. Instead of watching as their talent pool slowly dwindles, employers are better off establishing a company culture of promoting from within.
"It's important for companies to promote from within. Otherwise, there's no career path for the people there and it forces [employees] to constantly be job hunting because they know they're not going anywhere in that company," says Penelope Trunk, founder of Brazen Careerist, a networking hub for young professionals.
While leadership development programs are great for identifying existing talent within your ranks, it's also a good idea for business owners to establish an overall company culture of promoting from within. The following will provide steps, examples, and advice for advancing your high-performing employees into positions within the company that are commensurate with their talent.
How to Promote From Within: Hire Right the First Time Around
Craigslist may be cheap and tempting, but it's not necessarily the best way to go if your long-term goal is to promote from within.
"Spend the necessary amount of money on recruiting because you're stuck with who you're recruiting if you promote from within," says Trunk.
Headhunters, established networking events, online networks, and word of mouth recommendations can lead to reputable prospects in lieu of blind ad posting. However, no matter what method you choose to line up an employee, their performance is ultimately what matters most. Luke Holden, co-owner of Luke's Lobster, shifted several of his employees that began in food preparation positions into managerial positions over the course of the company's first year, including his general managers and director of catering and special events. "We haven't necessarily gone in the direction of finding someone that has a ton of previous experience, but rather hiring good, smart people that want to learn and achieve."
Ooshma Garg, formerly of Anapata and founder and CEO of Gooble, an online marketplace for home cooked food, has implemented an eight to ten week trial-to-hire strategy. "When I meet someone who I think will be a great fit for our company, I'll meet with them and if we decide that we want to try out this relationship, we'll set a certain project for them with a completion date that is typically eight to ten weeks away (our trial periods are always eight to ten weeks) and a set deliverable," she says. The deliverable will be a metric and will vary depending on the position. "For instance, if I were to hire someone on the marketing end or the sales end, I would say, 'this metric is that in eight to ten weeks, you'll bring 250 new chefs to the Gobble network,'" Garg explains. For a more technical position, the metric may be for a developer to improve upon or to create a program within the Gobble infrastructure. During the trial period, Gooble provides class credit for candidates who are students, and a stipend for those who are not.
"When I haven't followed this method, I can definitely see the difference, see the problems that occur when you put someone into a role without having worked with them before and without having developed them from day one," says Garg.
Once you have the right people onboard, how can you make sure that your employees move up accordingly?
How to Promote From Within: Make Your Employees Take Risks
Trial and error is a great learning process for everyone, and your employees aren't exempt from occasional failure. However, it's how they handle new tasks that will show you what they're made of, and if they have the potential to take on an increasing number of responsibilities. Advises Trunk, "sometimes when you're training someone to be promoted, you should give them work that they've never done before, and they'll mess it up. But the company culture has to respect that people who are learning mess up, and that's okay as long as they're learning."
How should a manager go about allowing an employee to botch a task? Trunk states that if you're managing an employee closely, you should be able to identify the exact area the employee will miscalculate. "If you know where they're going to fail, you can catch them before they do any damage," says Trunk. "You can say, 'well, you did this wrong and here's the thing that you should ask next time.'" She says that a good manager can manage all failure so that it's a learning experience.
In this case, a manager can decide indendently how much time they want to invest in helping the employee during the trial and error process. Based on the needs of the company, a manager may want to continue training an employee or, after a sufficient period, opt to promote someone else or hire an external candidate. At that point "it's a cost benefit analysis," says Trunk.
How to Promote From Within: If An Employee Wants More Responsibility, Give it to Them
Natalie Reinert started out as a merchandise hostess at Walt Disney World Resort in 2005. Desiring more responsbility, she took matters into her own hands. "I went to my leadership and told them I would like to move up, and they agreed I could do that," she says. Six months later, she became a coordinator. After informing her area leader that leadership (the lingo for management at Disney) was her ultimate goal, Reinert was assigned a mentor from the leadership casting team. She was then given a breadth of challenging tasks that included tracking the financial data in her assigned store, working with other departments to determine shelf inventory, and creating an efficient system to track customer orders. Leading up to her leadership assessment, "I mock interviewed with at least a dozen managers from across the park who volunteered their time to work with me," says Reinert. She became a retail guest service manager in 2008.
However, some people have remained in entry-level positions through their entire time with Disney, lacking the initiative to advance into positions that require additional levels of responsibility. Disney is a large conglomerate organization that requires an abundance of personnel. However, smaller companies or businesses in general that want to make sure their staff is working to the fullest extent of its potential can choose to adopt an "up or out" policy.
"An up or out culture tends to make people higher performers," says Trunk. "If I start seeing that [my employees are] not going to grow at my company, I try to counsel them about what they should be doing and where they would grow. Really, any good manager shouldn't have to fire someone. They should be making it totally clear that this isn't the right job for them and that person should want to leave anyway. The term is called counseling out as opposed to promoting from within."
Garg takes a different approach with respect to challenging her employees. She requires that they create a specific set of goals for themselves prior to being hired. During her initial meeting with a prospective employee prior to the commencement of their trial-to-hire period, she gives them a survey in which they are required to list three goals that they would like to achieve during their working relationship with Gobble, which do not have to relate directly to the position for which they are being hired. "What do they want to learn about? Do they want to learn how start-ups get customers? Do they want to learn about how start-ups do accounting? It doesn't necessarily have to relate to their role, but I want to make sure that they're developing themselves personally as well as professionally," she says. Those goals are later reassessed every quarter, along with performance evaluations as per their duties with Gobble. Garg credits this method for allowing her staff to visualize their goals. "I think that's helped people achieve their goals and, thus, take on more responsibilites almost consistently every three months," she says. "I am promoting them by using their own goals and their own chosen deliverables."
How to Promote From Within: Value the Teaching Experience
Managers are referred to leaders at Disney "because it's about finding talent and teaching," says Reinert. "A big part of your job is teaching."
When Reinert first notified her superiors that she desired to advance into the position of coordinator, the company provided her with a binder filled with information, including the classes that she could take through Disney University and other management in various Disney support offices that she should meet with in order to better understand the chain of command.
"The only way to get someone to the next level is to have very strong coaching and very strong mentoring. If you don't reward people for good mentoring, then people aren't going to get the mentoring they need to be promoted," states Trunk.
For a smaller businesses, it is essential that management offer creative and cost-effective ways for employees to reap the benefits of on the job education. Presently, Gobble employs between five to ten people, which includes full-time and part-time workers, as well as interns. Garg has adopted an inclusive culture within her start-up so that employees can both learn and grow simultaneously.
"As much as I can, I leave meetings and events open that I am invited to for our employees to attend. So, if I'm meeting with an investor and an employee's personal goal is to one day start their own company or to understand how founders communicate or how founders fundraise, I will do my best to try and include them in one or more meetings that investors may consent to," she explains.
Garg is well aware of the apprehension that some of her associates may feel when it comes to including their staff in the intimate details of company operations, but she has found that many of those fears are misdirected. "Some founders might be afraid that involving employees in so many events or meetings may encourage them to leave or find other job opportunities or find other interests," she says. "But what I find is that it absolutely increases their loyalty to you and to the company because they understand that you care about them and not just their work."
How to Promote From Within: Be Open and Encourage Feedback
Do your employees feel comfortable talking to you? This may be a great indicator of your company's future success when it comes to promoting from within. Managers should be open to evaluation in the same way they allow their employees to be evaluated.
"I think it's important to consistently get feedback from your teammates; constantly culling your teammates to ask how their job is going, how you're doing your job, how you can do it better, the good things you're doing, constantly getting 360 feedback," says Holden.
Stacey Thomson, public relations manager at Disney Institute, the external training division for all of the Walt Disney Companies, believes that companies should institute open door policies that extend to both private and professional matters. "If you truly have that open door policy, then they're going to feel comfortable coming to you and saying, you know, 'I saw this position posted in XYZ division of the company and I'd really like to put my name in the hat for that,'" she says.
As with family, a close knit team may not be able to imagine the loss of high-performing employees that have become essential to the fabric of their department. However, Thomson stresses that, although those employees may be doing a great job, your best bet is to promote them into a position where they can do a better one.
"In reality, those employees will probably leave on their own if you don't encourage them."
http://www.inc.com/guides/2010/12/how-to-promote-from-within.html
12/8/10
10 ways to make sure your clients pay you
One of the biggest issues consultants face is getting paid. Most clients don’t realize that you don’t get paid if they don’t pay. And because there are plenty of those types of clients out there, getting paid can be a challenge. Luckily, there are also plenty of ways to help ensure that you will get paid for the work you do. Let’s take a look at 10 ways you can help yourself out.
1: Bill often
The last thing clients want is one huge bill at the end of the year. They would rather pay small chunks frequently. To that end, you might consider offering maintenance contracts where you give clients a certain number of hours per month for a set fee. They pay the fee, they get the work. But if they don’t want such a deal, make sure you are not holding onto invoices and then sending them an envelope filled with bills that could have been paid in smaller, more manageable, increments. Clients will be much more willing to submit payment for smaller bills.
2: Bill quickly
As soon as you are done with your work, bill it. The work (and your success) will be fresh in the mind of the client. If they see a bill the day of or the day after, they will be much more likely to pay it (and pay it quickly) because the work you did is still clear in their mind. This also helps the client to know that you are on top of things. If you wait a week or two, you might have to refresh their memory. Or worse, they may take the later invoice as a sign that a later payment is an okay practice with your business.
3: Bill professionally
Do not send your bill in a handwritten note or as an email. Your bill should be on a professional letterhead and/or attached as a PDF to an email. The more professional your correspondence is, the more seriously you will be taken. The more seriously you are taken, the more likely it is that your clients will submit payment. If you are serious about what you do, you’ll want to put some effort into branding your company across the board — and that includes billing.
4: Bill consistently
We see this all the time. People submit invoices for inconsistent amounts. One month you’re charging X for a network drop and the next, you’re charging Y for that same job. This will put clients in an awkward position of not knowing what to expect every time you do work for them. Make sure your pricing is consistent. And make sure your clients are aware of your pricing up front. If the client knows what they are getting into, they will have fewer objections when they see those bills.
5: Keep meticulous records
If you keep poor records, you will have trouble keeping track of who has paid, who has not paid, and what exactly each client has paid for. You should be using software (such as QuickBooks) to keep track of your records. With a sound solution, you will be able to quickly and professionally show records of what has happened with a client, should someone have a problem with a bill. If you’re trying to juggle your books with a spreadsheet and a Word document (and a few post it notes), your consultancy life will be insane.
6: Do good work and do it efficiently
The better and more efficient your work is, the more likely you are to be paid. If your work is slow or ineffective, your clients will have trouble ponying up the cash to cover a job that should have taken less time. This also goes for doing effective work. If you constantly have to return to repair something you should have repaired the first time around, your clients are going to hesitate to pay (and they will be less than likely to refer other clients to you).
7: Accept all forms of payment
This should go without saying, but if you only take cash and checks, you might find you have some clients who won’t hire you or won’t pay you as quickly. Accepting credit cards (and even forms of payment like PayPal) will go a long way toward getting you paid faster. Of course, you’ll take a fractional hit on your costs due to processing fees, but these fees are minimal when you’re actually getting paid.
8: Require deposits for larger jobs
If you’re about to take on a large job, you should require a percentage of the final cost for the job up front. Although this won’t ensure the client makes good on the remainder, it will at least give you a portion of the payment before you start your work. This will also show your clients your dedication to the job. Also note that if you quote a client a certain price and that price changes at any point, it is your duty to report the change to the client as soon as possible.
9: Do not work with repeat offenders
We’ve all seen them — clients who either do not pay or pay very late. Why do you want to go through the hassle of having to hassle these clients to get them to pay? You don’t want this headache, so don’t take jobs from them. Yes, it is tempting — especially when you are first starting out or when times are hard. But those clients who don’t pay (or pay very late) are doing nothing but taking valuable resources from you. Instead, work with reliable clients who will pay and pay in a timely fashion.
10: Have an attorney at the ready
Although we all hope it doesn’t come to legal action, it can. There are those clients who simply refuse to pay. Sometimes, just a letter from an attorney is enough to light a fire under their seats. But when just a letter isn’t enough, it might be time to send in the hounds. Once you have had to do this with a client, consider that client to fall under tip # 9.
Walking the line
Getting paid is a tricky business. There is a fine line between being professional and being a pest. Your clients will, for the most part, be in business to make money, not spend it. So when you have trouble collecting your fees, you must exercise care and concern toward future business. Always consider those clients as a long-term investment and not a one-time payment.
12/1/10
What to Consider When Giving a Holiday Bonus
'Tis the holiday season, and for businesses that means considering how to indulge employees with vacation time, holiday parties and, the most loaded perk, holiday bonuses.
Holiday bonuses are a longtime tradition for industries like finance — think the big Wall Street firms that get Christmas bonuses the size of annual salaries — and the National Labor Relations Board has allowed unionized workers to make holiday bonuses a contractual obligation. But small businesses operate in a nebulous realm of personal discretion, where owners set their own precedent for holiday extras.
Owners can establish gifts around the holidays as an act of goodwill or as part of employees' pay package, says Harry Dannenberg, chairman of the New York City chapter of SCORE, a national nonprofit organization that offers small business counseling and advice. "It's such a personal issue that there's not a precedent for it," he says. "Different industries have different attitudes about it. If you're a mom-and-pop operation and you're part of a business family, you might have a more generous approach to the holidays than if you run a chain."
In a survey last December, Challenger, Gray & Christmas, an outplacement consulting firm, found that 64 percent of employers planned to give holiday bonuses, up from 54 percent in 2008, when most industries were strained by a bad economy. Greater economic conditions certainly play into whether to give a holiday bonus, Dannenberg says, but it's good form to show employees appreciation for a successful year. "If I had a good year and people worked very hard for me, I might make a statement of how grateful we all are by presenting them with a nice gift," he says. "But it's very individual, especially with small businesses, and how you relate to the people who work for you."
This year's holiday bonus will set the precedent for subsequent years', so structuring bonuses to be affordable yet considerate is key.
How to Structure a Holiday Bonus: Decide its Purpose
What role will a holiday bonus play in your overall, yearlong pay scheme? Is it a substitute for a year-end bonus? Is it a substantial contribution to annual pay? Or is it a token of holiday spirit?
If a business already pays a year-end bonus, a holiday bonus becomes more of a gift of appreciation than part of employees' annual pay and benefits package, Dannenberg says. "If you're in a business where you get year-end bonuses, usually Christmas becomes far less of a significant issue," he says. "If you're a clerk in the store and the owner wants to spread a little cheer and give some money, give families turkeys, it becomes a small thank-you. A big thank-you is a raise or a year-end bonus."
Ben Hemminger, CEO of Fashionphile, a Beverly Hills company that sells second-hand luxury handbags, says he gives a year-end bonus around the holidays. The family-owned business has 11 employees, mostly part-timers, and the full-time employees "are all related to me," he says. Full-timers get a $500 check — taxes deducted and all — around the last week of December, and part-timers receive a $100 cash card. "There's probably a more intriguing way to do it," he says, "but everybody would rather have the money than something worth the money."
Dannenberg agrees that token thank-yous like cash cards belong at the general employee level, not the management level. "It should be given to employees who provide a service in a business," he says. "In something like auto repair or retail, it becomes more of a gesture of recognition of service."
How to Structure a Holiday Bonus: Budgeting the Bonus
Holiday bonuses meant as tokens of appreciation don't belong in a business plan, Dannenberg says. Rather, he suggests looking at revenue from the first 10 months of the year to decide how to approach bonuses each holiday season. "Say it was a good year, I made money, therefore, on the strength of that performance, I can give 'x,'" he says. But use generosity in moderation, Dannenberg warned. Being too generous in a good year could make for an embarrassing downgrade in a bad year.
Six-year-old Fashionphile spends a few thousand dollars on year-end bonuses and year-end gifts for its part-time employees, but Hemminger says everyone understands the bonus is a small token. "No one gets paid a whole lot to begin with, so it's not like we have high expectations," he says.
Start-up businesses should do some footwork before deciding how to approach bonuses, Dannenberg says. "The issue becomes what is the precedent," he says. "If I were starting a new business, I would go around and chat with other similar merchants to see what they do. Get a feel for how other people make that evaluation and judgment."
How to Structure a Holiday Bonus: Cash versus Gift
If a holiday bonus isn't an established part of annual pay, a gift is just as meaningful as a little cash — sometimes more so if the cash gift is going to be small. "You give someone a really small amount, it's insulting," Dannenberg says. "But give them a nice bottle of wine and something that costs $10, it's nice. With a nice note, it's an expression of thanks, a matter of holiday spirit and cheer."
Hemminger says he's considering giving employees gift cards for the three restaurants they go to for lunch every day — a tax-free and useful gift, he says.
Blurb, a San Francisco publishing company where authors design their books online, during the holidays fields orders from businesses making books for their employees as holiday gifts. The employer designs the book from size and shape to content — photos or photos and text. Square books start at around $13.
When Dannenberg owned a chain of six retail stores, around the holidays he would give employees a big basket filled with fruit and a turkey. "They grew to look forward to it and enjoy it," he says, adding, "I would stay away from giving money at Christmas because of the potential cost.
"I'd go with a nice box of candy and a bottle of wine, something that you can have uniformity that everyone can enjoy."
So as you decide how to handle the holidays, keep in mind that whether it's cash or wine, to employees, it's your appreciation for their service that counts.
http://www.inc.com/guides/2010/11/what-to-consider-when-giving-a-holiday-bonus.html
How to Get What Your Business Is Worth
If you have ever promised your child a treat in return for good behavior, you know all about negotiating leverage.
When selling an attractive business, you also have leverage—up to the point that you sign a letter of intent (LOI), which almost always includes a “no shop” clause, forcing you to terminate discussions with other potential buyers while your newfound “fiancé” does due diligence before handing over the check.
After you sign the LOI, the balance of power in the negotiation swings heavily in favor of the buyers, who can then take their time investigating your company. At this point, there is little you can do.
Yet, with each passing day, you will likely become more psychologically committed to selling your business. Savvy buyers know this and often drag out diligence for months, ultimately manufacturing things to justify lowering their offer price or demanding better terms.
With your leverage diminished and other suitors sidelined, you are then left with the unattractive options of either accepting the inferior terms or walking away.
Peter Lehrman, the founder and CEO of AxialMarket, an online marketplace serving buyers and sellers of private businesses, describes a situation he witnessed first-hand:
“The company was a distributor and installer of telecom equipment to businesses and commercial real estate developers. The owner had built a nice business with recurring contracts driving $15 million in revenue and nearly $2 million in pre-tax profit. The owner made the mistake of approaching buyers haphazardly with the help of his accountant and lawyer. The most attractive acquirer insisted on exclusivity while they did some due diligence, which dragged on for many months, with the acquirer asking for concessions and delaying the process. The business owner had given up all his leverage and hadn’t developed a set of alternative buyers. Finally, the deal fell apart.”
Lehrman recommends seven things you can do prior to signing an LOI to minimize the chances of your deal dragging on for months and becoming watered down:
1. Make sure your customer contracts have “successor” clauses.
Try to have customers sign long-term, standardized contracts that include a clause stating that the obligations of the contracts survive any change in ownership of your company. Have your lawyer wordsmith the details.
2. Nurture and prepare a group of 10 to 15 “reference-able” customers.
Acquirers will want to ask your customers why they do business with you and not your competitors. Cultivate a group of customers to act as references before you sign the LOI.
3. Ensure your management team is all on the same page.
During due diligence, acquirers will want to run “isolation” interviews, during which they speak with your managers without you in the room. They are trying to understand if your company is pulling in the same direction and to identify any dissension or incoherence among your ranks.
4. Make sure you have audited financials.
An acquirer will have more confidence in your numbers and will perceive less risk if your books are audited by a recognized accounting firm.
5. Disclose the risks up front.
Every company has some risk factors. Disclose any legal or accounting hiccups before you sign the LOI. For example, don’t wait until after you have signed an LOI to let the potential buyer know that a former employee is suing you for wrongful dismissal.
6. Negotiate down the due diligence period.
Most acquirers will ask for a period of 60 or 90 days to complete their due diligence. You may be able to negotiate this down to 45 days—perhaps even 30 with some financial buyers—so include in your negotiations with the buyer a discussion on the length of diligence. At the very least, you’ll alert the acquirer to the fact that you’re not willing to see the diligence drag out past the agreed-to close date.
7. Make it clear there are others at the table.
Clearly but respectfully communicate that there are a number of interested parties at the table. Explain that, while you think the acquirer’s offer is the strongest and you intend to honor the “no shop” agreement, there are other interested parties and that those relationships will be rekindled in the event the buyer starts to negotiate in bad faith.
Taking all seven steps will help you protect the value of your business as the balance of power in the negotiation to sell your company swings from you to the buyer.
http://www.inc.com/guides/2010/11/how-to-get-what-your-business-is-worth.html
Why the Best Entrepreneurs Are Closet Pessimists
Optimism can kill your business. There, I said it. Let the comments and rants begin (and if they are anything like those written in response to my Why "Be Passionate" Is Awful Advice post, I'm sure another great debate is on the horizon). But before you say that I'm clueless, out-of-touch with Gen Y, or a detriment to entrepreneurs, allow me to explain my position.
When I started my first business in 2003 - one that ended up being a colossal failure that almost bankrupted me (which I now refer to as "the company that shalt not be named") - I was optimistic about everything. Every "creative" marketing idea was touted as if it was destined to be a "guaranteed winner" capable of generating tons of high quality leads right out of the gate. My partners came out of every sales meeting as if we had been victorious (we even foolishly spent money on mini-celebrations at the local pub after most presentations). Our business plan's seven figure financial forecasts seemed like certainties to us (we even made them "more reasonable" and scaled them back from our original eight figure forecasts). However, there was only one thing true about each of these scenarios.
They were all false, utterly unrealistic, and ended up playing a large role in the company going belly up.
In truth, our marketing campaign results were beyond subpar. Rarely did "the company that shalt not be named" convert sales - even after "great" meetings. And the fact that the company went bankrupt, well, that just shows you how credible our projections were.
The company folded in a little over a year as the result of my partners and I being overly optimistic every step of the way. Had I thought through our marketing campaigns more, learned from my selling mistakes or been more grounded with my financials - instead of being in the clouds and "hoping for the best" - the company that shalt not be named might still be in existence today.
In the new economy where the fight for market share and revenue is more fierce than ever, young entrepreneurs cannot afford to be overly optimistic about any of their goals, tactics, or initiatives. Excessive optimism leads to phrases such as "it will all work out somehow" rather than realistic mindsets such as "how can we make this work at all costs." In many cases, having a "the glass is half full" mentality blinds an entrepreneur from seeing all of the true challenges and issues that surrounds his business and decisions. In business, as in life, things don't always work out - and almost never work out as planned.
In my opinion, the best entrepreneurs are business owners who have an optimistic attitude coupled with a pessimist's viewpoint and rationality. Having an ever-present "glass is half full" mentality is dangerous and might very well lead your start-up or business down the toilet.
Mind you, I'm not advocating that you need to walk around acting as if there is a rain cloud following you. Nor am I telling you to be a Debbie Downer when it comes to growth opportunities. However, from a purely decision-making perspective, I advise you to be a cautious closet pessimist instead of an eternal optimist as you guide your business toward success - and your business will be better and stronger as a result.
http://www.inc.com/millennial-entrepreneurs/why-the-best-entrepreneurs-are-closet-pessimists.html
When I started my first business in 2003 - one that ended up being a colossal failure that almost bankrupted me (which I now refer to as "the company that shalt not be named") - I was optimistic about everything. Every "creative" marketing idea was touted as if it was destined to be a "guaranteed winner" capable of generating tons of high quality leads right out of the gate. My partners came out of every sales meeting as if we had been victorious (we even foolishly spent money on mini-celebrations at the local pub after most presentations). Our business plan's seven figure financial forecasts seemed like certainties to us (we even made them "more reasonable" and scaled them back from our original eight figure forecasts). However, there was only one thing true about each of these scenarios.
They were all false, utterly unrealistic, and ended up playing a large role in the company going belly up.
In truth, our marketing campaign results were beyond subpar. Rarely did "the company that shalt not be named" convert sales - even after "great" meetings. And the fact that the company went bankrupt, well, that just shows you how credible our projections were.
The company folded in a little over a year as the result of my partners and I being overly optimistic every step of the way. Had I thought through our marketing campaigns more, learned from my selling mistakes or been more grounded with my financials - instead of being in the clouds and "hoping for the best" - the company that shalt not be named might still be in existence today.
In the new economy where the fight for market share and revenue is more fierce than ever, young entrepreneurs cannot afford to be overly optimistic about any of their goals, tactics, or initiatives. Excessive optimism leads to phrases such as "it will all work out somehow" rather than realistic mindsets such as "how can we make this work at all costs." In many cases, having a "the glass is half full" mentality blinds an entrepreneur from seeing all of the true challenges and issues that surrounds his business and decisions. In business, as in life, things don't always work out - and almost never work out as planned.
In my opinion, the best entrepreneurs are business owners who have an optimistic attitude coupled with a pessimist's viewpoint and rationality. Having an ever-present "glass is half full" mentality is dangerous and might very well lead your start-up or business down the toilet.
Mind you, I'm not advocating that you need to walk around acting as if there is a rain cloud following you. Nor am I telling you to be a Debbie Downer when it comes to growth opportunities. However, from a purely decision-making perspective, I advise you to be a cautious closet pessimist instead of an eternal optimist as you guide your business toward success - and your business will be better and stronger as a result.
http://www.inc.com/millennial-entrepreneurs/why-the-best-entrepreneurs-are-closet-pessimists.html
The Resurgence of Pay-For-Performance?
Most businesses are running lean and mean these days. Dead weight staff has been cast aside and employees that remain are just happy to have a paycheck. Now many who work in entrepreneurially-run companies are left wondering: what will future income growth look like and when will it re-appear?
During a conversation with Norm Brodsky at Inc. Business Owners Council's end-of-year bash in New York, he suggests that employee income growth will increasingly take the form of pay-for-performance compensation programs. This trend is important because valued employees need to be retained and rewarded but owners need the downside protection to shield themselves from the vicissitudes of a slowly re-emerging economy.
Pay-for-performance is common with our revenue-based staff, such as sales people. And company-wide bonuses are nothing new (although they seem like a distant memory to many) but pay-for-performance for non-revenue-generating staff is a whole other thing. Here's Norm's three-point program for introducing pay-for-performance in your firm:
1) Open up your books just a little. While you may not be interested in opening up your financials to your staff entirely, you'll have to give them enough information to understand how they're compensated. If the production/manufacturing side of your business is going to receive bonuses for keeping production costs low, you'll need them to understand the costs that go into making your widgets.
2) Commit to teaching financial literacy to your team. Jack Stack, the co-author of The Great Game of Business complains that management expects workers to help them stay profitable but they never teach them what profitability really means. A firm's cash flow and balance sheet statements tell exciting stories, according to Stack, but you'll never get your employees to pay attention to performance if they don't know the difference between revenue and profits.
3) Explain the difference between a one-time bonus for performance and a permanent bonus. Employees are conditioned to expect any one time amount on a permanent basis and will be disappointed if it doesn't show up every time. This is why items #1 (opening up the books) and #2 (teaching financial literacy) are so important to creating a successful "pay-for-performance" program in your firm.
http://www.inc.com/lewis-schiff/the-resurgence-of-pay-for-performance.html
Resolving Your Inbox Nightmares
Help! My Outlook inbox is haunting me – even in my sleep! This is the cry for help I receive from all too many business owners who have lost the battle of the bulging inbox. Alas, the dreaded message appears in their sleep: “downloading 1 of 1238 email messages” flashes through their dreams throughout the restless nights.
Let’s take a look at some simple, first-step solutions to the bulging inbox predicament so you can return to a good night’s sleep.
Diagnosing the problem is the first step to resolving the issue. Start by assessing the situation with these questions and action steps.
How many newsletters, special offer lists and updates do I subscribe to? Of those, how many do I really read and act on on a regular basis? Take the plunge and devote some time to unsubscribing from the updates you don’t utilize regularly.
How many lists am I on? Do I participate and/or learn from them? Do I get my updates in individual emails or in digest form? (You can choose the digest form in your profile settings on Yahoo and Google lists.) Let go of the lists you don’t participate in. If you participate as an expert but don’t learn much, reassess the time spent here.
How many of these emails are really necessary? Can I unsubscribe, change protocol with my outsourcing team, delegate them or remove myself from lists and updates I no longer need?
Taking these steps often eliminates a good percentage of the overflow. Now let’s look at some organizational options.
Scheduling – Schedule about three blocks of time in each day to do nothing but act on and answer emails. Don’t answer the phone or allow any other interruptions. During the non-email time of the day, shut down Outlook. It’s a bit daunting at first but your email will get far more attention when you give it your undivided attention than it will if you pick and choose who to respond to all day long while multi-tasking.
Flagging – I had fallen into the bad habit of flagging emails for a later time – and I would never get back to most of them! Now when I flag an email I put a reminder on it as well and schedule it for one of my “email only” blocks of time. I no longer use flagging as a procrastination method.
Creating Rules and Folders – If you receive emails from a constant source, like clients or your website, create separate folders for each source. I have created a “rule” so that all of my client emails go into the “current client” folder. All of my website comments and inquiries go into another folder, etcetera. Creating rules like this will help you to prioritize your responses. Go to Outlook help if you don’t know how to do this.
Delegate – How many of these emails are items do YOU have to act on? If you receive orders and client requests in large numbers, perhaps it’s time to bring on part time help. This can be done on a virtual basis so it doesn’t always mean bringing someone into the office. If you are “cc’d” on a lot of emails consider asking the source to stop sending you copies of those items where you no longer need to be in the loop.
Schedule RSS Feed Time – If you subscribe to a lot of RSS feeds, create a rule to have them go into one folder and schedule time to follow your favorite feeds. Don’t allow these to be a big distraction for you. I let all my feed updates wait until Friday and I act on them then. What a time saver!
http://www.inc.com/marla-tabaka/resolving-your-inbox-nightmares.html
How to Hire Seasonal Employees
The holiday sales surge serves up equal doses of thrill, stress, and reward to business owners and managers. Amid all that excitement, and all those tiring hours, the last thing you want to worry about is not having enough staff to pull it all off. A robust, knowledgeable, and well-trained work fleet will keep your operations steady during the swell, and may also give you a leg up over the competition.
For this reason, taking on additional employees has become necessary among businesses during these early winter months. Last year, in fact, retailers in the U.S hired 453,600 extra workers from October 2009 through January 2010, up from 231,000 during the same stretch the year before.
The National Retail Federation projects a 2.3 percent increase in sales during this year's holiday season, meaning businesses will likely add even more staff to absorb the hike. In preparation, here are a few tips about finding, training, and hiring a successful team during the months to come.
How to Hire Seasonal Employees: Start Early
Especially for businesses with huge fluctuations, preparing a seasonal staff shouldn't take precedence only during the holiday months. The search for competent employees should continue all year round.
"If you're a retailer who's not hiring in September, you're giving your competitors a lead on you," says Daniel Butler, vice president of retail operations at the National Retail Federation. Butler, who worked as a retail manager for 26 years, advises companies to start screening applicants in September to gauge how well the person gels with the team. Doing so also puts you ahead of the curve when it comes to making the necessary marketing, staff, or inventory changes as the months progress. "For the holiday season, you want to be in front and ready for the business when it happens," he says.
The first place you should look to find employees is your part-time staff list, often called a flier or floater list. By drawing from a pool of workers already familiar with your organization, you can be assured that they will catch on quickly with the everyday operations. "We try to anticipate the increase and have a panel of part-time staff that we can draw from," says Jim Kiriwan, owner of Try Sports, an athletic apparel retailer based in South Carolina. "They're pretty experienced and trained and can hit the ground running in the store."
As you begin to flesh out your holiday reserves, you should also look for and cultivate certain traits among the prospective hires. And starting early gives you an early glimpse at who will break the greatest strides during those crucial holiday months. "You're not just looking for warm bodies," Butler says. "You're looking for people that are going to be good with the public, who realize that there's a lot more to it than just standing at the register ringing people up."
How to Hire Seasonal Employees: What to Look For and Where
It's very possible that your part-time staff simply can't fill all the holes you have in your roster. This once again underscores the reason to start ahead of time: you need to assess the upcoming needs and anticipate where you'll have to make the biggest changes. Butler says to look at areas like your sales plan, your sales from the prior year, and your current coverage to statistically forecast your needs by day and by hour.
Once you create your roadmap, it's time to fill in the blanks. Do you need more sales strength? Maybe you need an extra set of hands in the stock room? Are there specific time slots that require some fleshing out?
Of course it's not enough to fill these positions with any old "warm body," as Butler likes to say; you'll want to assemble the best team possible. When interviewing candidates, look for people who have a willingness to learn, an ability to be flexible with demanding hours and responsibilities, and a genuine interest in using or selling the products. "I always found that schoolteachers were great seasonal hires," Butler says. "They picked up things quickly and they also helped teach other people."
This year, as the recession lingers and unemployment remains high, there should be no shortage of applicants looking for extra work. If you still have trouble finding sure-handed employees, however, consider putting out advertisements or using a temp-staffing agency. Sites like SnagAJob.com, SeasonalJobs.com, and GrooveJob.com are geared specifically towards part-time, hourly, or student positions and allow you to post your openings for free. Or, if you're looking to cast a wider net, trusty job search engines Monster, Simply Hired, and Indeed have full sections for part-time positions as well.
How to Hire Seasonal Employees: Train Often
For the average small business owner, customer service can and should be one of your greatest distinctions. Along with product expertise and specialty, it's one area where you can outpace big box retailers that make huge price slashes and feature wide varieties.
Kiriwan of Try Sports, a 2010 Inc. 5000 list honoree, says that his company puts a lot of time and energy into having "extraordinary customer service." One of the ways he enhances the customer experience is by putting employees through a rigorous training regimen so they know the products inside and out. For Try Sports, which specializes in fitness equipment like heart rate monitors, this knowledge is crucial. "We train the staff to be very familiar with the product, and they're probably using it themselves," Kiriwan says.
Like product training, sales training is also a critical component of success during the holidays. But don't expect any overnight miracles. "Trying to teach people to sell is always difficult, and especially to sell in the right way," Kiriwan says. He and the managers spend a lot of time coaching the staff to sell the right way, which includes not pushing customers to buy additional products. It may take a little longer with seasonal hires, but you should always aim to get them to buy into your mission and really 'wow' the customers every time they walk in.
"At the end of the day, it's the people that really make the difference in a business: the quality of the staff, the quality of the managers, the quality of the senior management," Kiriwan says. "The biggest reason people don't come back is because they forget."
How to Hire Seasonal Employees: Promote Progress
Seasonal employees not only give you an extra boost during the busy season, but they also provide a repository of talent should you have full-time hiring needs in the future. From that standpoint, you can look at the work almost like a two or three month job interview.
"In an ideal world, all of our full-time people would have started as part-timers," says Kiriwan "You're actually making employment decisions based on hard performance data that has been built up over a period of time, not relying on subjective interviewing to make your decisions."
Nearly all of the Try Sports managers have in fact started in lower level, part-time positions, Kiriwan says. Above all else, this can incentivize people to want to join a stable, fast-growing company with opportunity to build a career.
It's also important to identify both tangible and intangible achievements when making full-time employment decisions. Maybe some workers may not have pulled in as much commission as others, but were always helping out around the store. By contrast, maybe some employees only stuck it out for the promise of holiday discounts. For the ones who put in the effort and did stand out, be sure to reward their success by at least letting them know that you'll consider them for full-time work when you expect to have turnover. "Managers always know who pulled their weight and who didn't," Butler says. "For some people, it can be the stepping stone to a new career."
How to Hire Seasonal Employees: Play By the Rules
The last issue to consider when acquiring temporary workers is categorizing their employment status properly. In order to escape extra paperwork, fees, or expenses, make sure to place all your part-timers on the payroll. They aren't independent contractors or even "permatemp" employees, Butler says, so you needn't extend health care benefits in most cases.
To avoid visits from the Department of Labor or IRS, the American Institute of Professional Bookkeepers puts out a free set of guidelines for navigating the rules (available by e-mailing at info@aipb.org). By failing to withhold taxes, for instance, you can get hit with a 100 percent liability, plus interest and penalties. The report also outlines the rules for hiring minors and family members.
If you do end up extending a full-time offer to a seasonal employee, you would need to re-classify the position so the person can buy into health benefits and other options. Misclassifying workers can lead to legal headaches, as Microsoft found out in 1996 when it doled out $97 million to a group of "permatemp" workers that it incorrectly excluded from its stock purchase plan. You can easily avoid problems like this by setting up a pay structure and quickly running it by your accountant or attorney.
http://www.inc.com/guides/2010/11/how-to-hire-seasonal-workers.html
How to Build and Maintain Good Business Credit
A great business plan can get your foot in the door, but it will rarely get you a loan. As America struggles through one of the worst recessions in history, lenders are facing tighter restrictions, which means they're increasingly cautious about which businesses they're lending to. Good credit has always been an important facet of the overall health of your business, but experts agree that now is the time to beef up more than just your credit score and take a deep look at how you can improve your business in the eyes of lenders.
"The thing that's hitting us right now is the conditions of the marketplace," says Denise Beeson, a commercial loan officer with Bay Sierra Financial based in Santa Rosa, California. Beeson explains that banks are sitting on very toxic portfolios, and the only firms that are receiving funding are high-end sterling borrowers; in other words, businesses that exhibit a proven history of repaying their loans and posting profits.
Building and Maintaining Good Business Credit: Why It's Important
Good business credit provides access to capital, which is more important than ever, says Jeff Allen, a partner at Trendant, a small business consulting firm based in Utah. "What we've seen with a lot of small business owners is that they have really good months and they'll have an influx of orders, and they'll be able to fulfill them, but the next month or the month after that, they're back down to what they were," meaning that the orders stop flowing and the businesses need cash to sustain their operating costs. It's not uncommon that small businesses face this kind of down time, Allen says, and with good credit small businesses can weather these types of marketplace uncertainties.
Building and Maintaining Good Business Credit: The 5 C's of Good Credit
The crucial elements of borrowing money from a bank can be grouped into five categories known as the "Five C's," which is the ultimate credit checklist for any entrepreneur or small business owner.
"The five C's are very important," says John Seelinger, a California-based volunteer at SCORE, a non-profit organization dedicated to assisting entrepreneurs and small business onwenrs. "You can't afford to be sloppy or haphazard with them. The underwriting process may be different, but the fundamental five C's are always there," he says.
CapacityCapacity refers to your ability – as a business – to repay the debt to the bank in a timely fashion. More than anything, a bank will look at your businesses' financial history to determine whether or not they will grant you a loan, so it's important to make sure that your company history has a pristine repayment record.
"Historicals is really important," says Allen. "Everyone comes up with projections, but actual historical information that can be verified is one of the most important things you can have. Without your historical information to back up your ability, you just have a 'plan.'" The bank will also assess how much debt you can really handle, and if the loan you're requesting makes sense given your cash flow.
Character
Banks want to be sure that they are lending money to reputable and trustworthy businesses. They're also looking to see that you're an expert in the industry your business operates in. Your character – both as a principle of the firm and the reputation of the business itself – should not be underestimated when approaching a bank for funding.
"You may see this as kind of inconsequential, but the quality of your references and the background and experience that you have to bring is critical," says Beeson. Plenty of people who have a great portfolio get turned down for a loan because they do not have any personal experience in that business.
Banks will also look at your personal credit, so maintaining a strong personal credit score is imperative. "A lot of what people do in their personal life goes directly into what they do in their business life," says Allen. "If they have a history of running up credit cards on a personal level, they'll probably fall into the same habit in a business." Remember, a bank will take a 360 view of your personal financial history, so before applying for a loan make sure you've settled any personal debts that could negatively affect a chance to obtain a loan for your business.
Capital
If you haven't invested in your business, why should a bank? A bank will scrutinize the financial investments that you and your co-founders have made because it's a good indication of your vested interest in the venture.
"Often times a small business owner who is just starting out will go to a bank and ask for a small business loan, says Beeson. "The bank is not going to lend them any money if they have no personal investment in their business." Essentially, banks want to see a track record that shows your dedication to your business, and a history of success within that field.
Collateral
Historically, collateral is the most important criterium in order to obtain a loan and establish a good credit line. "The key is collateral," says Allen. Collateral can be anything from real estate to equipment, and even purchase orders. If a business has an order that comes in, Allen says, "a bank will lend on that all day and night, because that's an order you can fulfill and then pay back."
Used equipment, an old truck, and other unsubstantial items that would not generate any substantial money for the bank are not going to be considered by the bank. "They're going to want to look for real property, and often times it's your home that they look for," says Beeson. "And with the real estate market as soft as it is, much of that real estate collateral is gone in equity. Unless there is a 401(k) plan or a stock portfolio or some collateral assets that are real, the bank isn't going to fund you."
Conditions
The bank will want to know what you will be using the money for, and what the current trends within your industry are. Beeson says that it's important to recognize that certain banks prefer to offer loans to certain industries, and so it's smart to target the banks that are most likely to view your loan favorably.
"I always tell people go to three banks like you would find a doctor," Beeson says. "Find a bank that wants to work with you and find out what it is you need to do. Prepare yourself for their criteria for a loan; it's not one size fits all." Overall, banks can be very choosy as to what their portfolio of loans looks like, so do your homework and find the best bank to suit your business's purposes.
Building and Maintaining Good Business Credit: Resources to Improve Your Credit
The first thing you can do to improve your credit is to make sure that all credit ranking companies, like Dun and Bradstreet, have the correct information about your firm. A wrong company name or a repaid debt that is not accounted for can ruin your chance of securing funding. Rectify any administrative mistakes before approaching a bank.
And, if you're having trouble securing a loan, or if you've been denied funding altogether, Beeson advises that you consider non-traditional financing routes, like peer-to-peer lending. Sites like Prosper and Kiva connect people who want to invest money with people who want to borrow money. And though you're not going to be able to finance a multi-million dollar business through these arrangements, they can get your business back on track.
http://www.inc.com/guides/2010/11/how-to-build-and-maintain-good-business-credit.html
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