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Making Work Fun

"To have a really happy workforce, you've got to do more than pass out party hats and serve birthday cake."

Beyond Party Balloons And Birthday Cakes
Over the years, I've tried a lot of things to make work a crazy, fun, and wild place. I've tried playing rock music in the morning, having group lunches at noon, throwing parties later in the day, and arranging for sports after work. But whatever crazy thing we try, it loses its novelty after a while and people tire of it. Yeah-they're good now and then to bring your office alive, give people a chance to have some fun together, add a human face to your management style, and as another way to show people that you care about them.

But I find that the bottom line is that people come to work because they want to work-not just to play games and have silly parties. Beyond the money, people expect more and more out of their work today. They want to contribute; they want to see that their contribution is making a difference; they want to learn; they want to grow; and they want to feel that they are part of a successful enterprise that is making a difference in the world. It's achieving these kinds of satisfactions that really keeps people coming back to work every day-not just the party balloons and birthday cakes.

Making Work Rewarding
Here are some specifics that you need to make sure you are doing to help ensure that their work is satisfying to the people who report to you:

* Today's workers at all levels want to know why they are doing something. Don't just say, "Drop everything you're doing and rush this shipment out." Instead, take two minutes to explain why.
* Today's workers want to work hard and have pride in their work-but they need appreciation and recognition for their contribution. Be generous with compliments.
* Today's workers want input and accessibility to their managers-but many shy away from giving input unless you make it easy for them. Small group meetings where you ask for suggestions are a good way to get people involved.
* Today's workers want to feel that their work is making a difference. Explain why their work matters. Tell them success stories about people who use your products and post press clippings on the bulletin board.

Helping Employees Progress
For many employees it's important to feel that they are always growing, learning, and progressing. With the few employees at small firms and flatter management structures at larger ones, it's a challenge to fulfill this need. But it's important you do-because often it's the best employees who most feel the need to learn.

Recently our Web master-the person who runs our World Wide Web site-left for another job. The manager of this area wanted to get a qualified candidate from the outside because none of the four internal candidates had all the necessary skills.

On paper he was right: the best candidate would be from the outside. But I want our company to go out of our way to retain people, give them new challenges, and make work fun for them. So we divided the Web-master job among several people, giving them all a great chance to grow and learn something new. In the short term it might be inefficient-but in the long run a highly motivated staff is priceless!

Remember, You Set The Tone!
Recently one of my managers pointed out to me that when I, as owner of my company, make a comment on people's work, they pay a lot of attention to it-something I tend to forget.

Another time, another manager told me that when I'm in a good mood it helps boost up everyone else-but when I'm not, it darkens people's days.

As a manager at any level, you've got to try to project a positive attitude no matter how crummy a day you are having-and you've got to go out of your way to be sure your comments have a positive effect on people. I've even got a little yellow stick 'em posted on my computer reminding me to always be positive!

First thing in the morning is a great time to pass some positive energy and appreciation on to others with an enthusiastic greeting and a little small talk.

And at the end of the day, no matter how rough it's been, I always try to wrap up with people on a positive note.

How Often Should You Party?
My experience is that about once or twice a week during working hours is the right time to spend on those silly, frivolous activities.

Here's some of the diversions that have worked for us:

* Friday morning bagels.
* Friday afternoon theme parties.
* Occasional lunch outings such as mini-golf, bowling, or billiards.
* Seasonal decorations at the entrance.
* Company crosswords and contests.

I've tried a lot of elaborate events outside of working hours, but they've almost always been disappointing. Attendance was mixed; people would arrive late; and managers felt pressured to attend.

A high-level technical manager told me that the single thing that impressed him the most about our company during his first month was that he went bowling and played miniature golf during company hours.


Are They Afraid of You?

I’ve often slipped a few questions into employee surveys to find out if they fear their managers. And guess what? They usually do. Distrust and fear are in fact the norm in traditional workplaces. The same workplaces where managers keep trying motivation programs, and keep complaining that the programs are no darn good.

Oh, I know what you are thinking. You are thinking that a good spanking used to be considered healthy for a child. Or that the “real world” is tough and you have to be, too. Maybe you’ve read an interview with one of those tough-ass execs like “Chainsaw” Al Dunlap, whose plan for Coleman when Sunbeam acquired it (according to a Wall Street Journal article of August 19, 1998) was to “start whacking people.” Well, just remember that you can’t find examples of highly motivated people in negative, threat-driven environments. Not unless you are willing to go all the way to survival issues, like a sweatshop or a mugging. And even then, compliance is the best result you can hope for, not personal development and excellent performances. Threats are no substitute for true positive motivation.

By the way, Al Dunlap was fired by his own board shortly after he made that comment about whacking people. His threats cost a lot of people their jobs, including many of the best who quit because they couldn’t stand working for him. But threats failed to produce the performances Sunbeam and Coleman needed to succeed in the marketplace. So I guess Chainsaw Al taught us a valuable lesson about management after all.

Unlike self-proclaimed tough guys like Dunlap, you probably make only casual, even accidental, use of threats. You probably follow your more sensible instincts and focus on the positive side of the motivation curve much of the time. But what happens when you send mixed signals, some positive, some negative? You get an average at best—in general, negatives outweigh positives about four to one in terms of their emotional impact. So the occasional threat can undo a lot of positive efforts. And when you cancel out, you end up in the middle, which is the lowest part of the motivation curve. Oops.

Moving Up the Motivation Curve
If you focus on the opportunity side of the motivation curve in Figure 1-1, you can think of your challenge as moving your people up the curve, toward higher levels of opportunity.

You know that people who are pursuing compelling personal opportunities are highly motivated. So “all” you must do to break through to higher levels of motivation is to increase the opportunities for your people. (That is in fact easier said than done until you learn new approaches to management, which is why there is more than one chapter in this book. But it isn’t nearly as hard as motivating them any other way since it actually works and other methods don’t.)

If you stop thinking about it as a motivation problem, and start thinking of it as an opportunity problem, you will theoretically be able to bring employee motivation and performance levels to the extremes you see in special circumstances, but so rarely see in your own work force. As you develop creative ways to put this theory into practice, you will be surprised at the amount of natural, internal motivation you release in your employees. To help you implement this theory, I’ve sprinkled motivation idea boxes like the following one throughout the book. And you will also find that later chapters explore different aspects of implementation in detail.

The concept that we can motivate people to their highest levels of potential by presenting them with opportunities to succeed instead of telling them what to do is a theory I arrived at after researching and working on motivation for many years, and I have subsequently been able to find compelling examples of its validity, and to collect and develop lots of practical ways to put it to use. When I realized that none of the so-called employee motivation programs could motivate people as well as an opportunity to succeed at something they cared about, I stopped looking for external “motivators” and began to seek ways of “turning on” people’s natural internal motivation to succeed. (It’s interesting that the word motivator isn’t even in many dictionaries.)

In truth, there is no such thing as a motivator. You can’t just apply the right treatment and “get” employee motivation, as if you were doing some chemistry experiment. People who are highly motivated are self-motivated. Period. They have a strong will to achieve, to succeed, to learn, to perform. External factors are insignificant in comparison with internal motivation to succeed. Impose external threats or incentives in too heavy-handed a manner, and these self-motivated people will lose their strong commitment and become as careless as the rest.


Building the Winning Team

"Everyone wants to feel that they are on a winning team, that the company is moving ahead, and that they are an integral part of the group."

Beyond Hiring Great People
Building the winning team requires more than just hiring a bunch of talented people.

It means hiring people who will work well together.

It means developing a shared vision and commitment.

It means physically bringing people together in formal group meetings for open discussion of broad-based issues.

It means encouraging positive, informal interactions between group members.

It means instilling a "winning" attitude throughout the organization.

It means watching for and quickly trying to reverse team-building problems such as jealousy, cynicism, and defensive behavior.

Get 'Em To "Buy In"!
To build the winning team, you not only need to show people what direction the company is headed in, but you need to get them to "buy into" this direction. Otherwise, you can't expect people to support a group if they don't agree with where it's headed or, worse, don't even know where it's headed.

Specifically, you need to show people:

* Your vision for the future.
* Your strategy for getting there.
* Why this is the best strategy.
* Every achievement that indicates this team is winning.

This is not a one-time discussion or announcement.

You need to constantly remind people what the organization stands for and that it does indeed hold a bright future for them!

Meetings Build Teams
Part of building the winning team is having some group meetings. Meetings, or even parties or celebrations, with as many people as possible from the entire organization, help build a feeling of solidarity throughout the organization.

But it is also important to have everyone participate in smaller group meetings where some work is done or some decisions are made. This makes people feel that they aren't just part of some big group, but that they are an active, important part of a team.

For key managers, or people in your work group, you should have an interactive meeting once per week-not a meeting where you just make announcements and summarize the work that's been done and needs to be done, but a meeting where everyone has an opportunity to give feedback on substantive issues.

Getting People To Work Together
Perhaps the most difficult part of building a winning team is encouraging positive, informal interaction between team members when you are not present. Here are some thoughts on this:

* Have team members take part in the hiring process of new team members.
* Assign specific projects for two team members to work on together.
* Try to arrange for close proximity of offices.
* Create an incentive-pay plan based on common goals such as profitability.
* Have a specific part of the salary review dependent upon "interaction with others."
* Take your team off-site for formal meetings as well as casual get-togethers to build a sense of bonding.

Watch Out For Team Destroyers!
Here are some of the problems that can rip the team-building process apart.

Jealousy. Be on guard for jealousy whenever a new member is hired into the group. Go out of your way to tell other team members how much their work is appreciated.

Cynicism. Some people are just negative by nature. Others might feel your company can't possibly prosper or they just don't like small companies, big companies, or whatever . . . . Be sure you are emphasizing the company's positive achievements to the group as a whole. And don't hesitate to confront any openly cynical individual and demand their behavior change at once.

Lack of confidence. Some people lack confidence in themselves and view attacks on their opinions as attacks on themselves, responding with statements like "Are you telling me my fifteen years of experience don't matter?" Stop any discussion like this immediately and, in a private one-on-one meeting, patiently point out the defensive behavior.


Think Success

"If you're like me, it might not always come naturally-but you can push yourself to think positive, and to talk success!"

Success Is All In Your Mind!
Thinking success goes a long way toward being a success!

If you picture yourself as someone who is ultimately going to succeed-then success is going to come a lot easier.

If, on the other hand, you picture yourself as someone who is either highly likely to fail or not to progress-then no matter how talented you are or how hard you work, it's going to be very difficult to succeed.

Thinking success can catapult your career or business ahead and make you more effective in all kinds of different situations, from dealing with people, to concentrating on analytical issues, to developing creative ideas.

Thinking failure can stop you cold, like the icy moat or cold stone walls of a medieval castle, and make you less effective in dealing with people, less able to focus on your work, and less likely to develop creative ideas.

The Success Formula!
So how can you think success? Here's a few quick suggestions equally applicable if you're running your own business or trying to build a career:

1. Have a five-year plan for success.
2. Realize that you, not others, ultimately control your success.
3. Brainstorm alternatives to tough situations.
4. Celebrate your achievements.
5. Shrug off your setbacks.
6. Develop a support network.
7. Always stand for integrity.
8. Remind yourself that every day is a new opportunity!
9. Keep yourself in top physical condition.
10. Always be open to learning new ideas.

Success Means Finding Alternatives!
No matter what job you have or what business you are in, a lot of crummy things are going to happen to you along the way.

But your ultimate success is going to have a lot more to do with how you respond to setbacks than with the setbacks you actually encounter.

If you have the right attitude, you can always find alternatives.

No Risk Means No Success!
To really get ahead, you've got to take some risks. No successful business or career was built without some risk taking.

This doesn't mean you should walk off a cliff-but instead you need to take calculated risks, after you have carefully collected and weighed all the information you can gather.

How much risk should you take? How far ahead do you want to go?

I don't think it's a coincidence that some of the most spectacularly successful business people have also had some spectacular failures and near failures. Take Henry Ford or Thomas Edison, for example; they didn't let their failures hold them back.

Come to think of it, with all of the failures I've had . . . maybe some really big success is just around the corner!

Successful People Celebrate!
An important ingredient for success is celebrating each and every triumph-and forgetting about every failure-both with the people around you and with yourself, too!


Adams Rules for Small Business Success

1 Have a clear-cut strategy!
A good strategy immediately distinguishes your business from those of your competitors, and gives your customers a solid reason for choosing to do business with you.

A good strategy should be developed after considering the market, customer needs, the competition, and your business's relative strengths and weaknesses. While the strengths of large, established competitors may seem overwhelming - such as deep financial resources and an established customer base - any new firm has built-in advantages too, such as more flexibility and the knowledge of how existing firms have already positioned themselves in the marketplace.

Many small businesses try to be all things to all people - which is really having no strategy at all! Even if you do everything else right ... it will be much harder, if not impossible, to succeed in business if you don't have a decisive strategy!

2 Test your advertising
Having bought advertising in every media from TV to subway cards, and having sold advertising for the newspapers, magazines, and phone books that I published, I have seen plenty of successful businesses built largely on the power of advertising. But creating successful advertising is a lot trickier than it may appear. Even the largest corporations and the most prestigious ad agencies find it difficult to create advertising that consistently works. So whether you're starting a company or managing an established one, don't spend a lot of money until you are sure that you have found a marketing mix that works for you!

With whatever advertising method you choose, you can greatly increase your chances of success with what I call "cheap marketing tricks," such as new customer specials, coupons, trial offers, events, exclusive offerings, give-aways, and more. Save the image advertising for big, rich corporations - small business advertising should focus completely on leading customers directly to action today!

3 Follow a plan and a budget!
Develop a plan before you start your business and update it at least once each year. A plan and a budget help you attain higher goals than if you just plugged away at your business one day at a time. If your company starts to go in the wrong direction, a plan and a budget will provide an early-warning system and help get you back on track.

You don't need accounting experience to set up a budget - but you do need to be very meticulous in projecting and recording each expense and every sale.

4 Guard your cash like King Midas!
As a small business owner, you are going to be fighting a constant battle to hold onto your cash. Overruns in start-up costs, lower-than-anticipated profit margins, and sales that grow slower than expected are among the most common cash drains on new businesses. Even established, highly profitable, fast-growing businesses often run out of cash because of the need to finance growing inventories and customer receivables.

You will also find that well-meaning employees will constantly be suggesting new ways to spend or invest your precious cash. You are going to have to pull in the reins and say "NO. NO. NO." to the many different demands on your money. You need to learn to project cash flow with a fair degree of accuracy. If you don't become disciplined in controlling your cash, you can get into trouble very quickly.

5 Watch your profit margins!
Many small businesses focus to much on sales and not enough on profit margins. And many underprice theirs goods and services. Can you increase your prices? Even if you can, it's crucial to keep your costs down!

Let's say you have a profit margin of 5 percent. If you're able to lower your overall costs by just 5 percent, you can double your profits! But to raise profits the same amount by increasing sales you would have to increase sales by 100 percent! A small change in your cost structure can go a long way toward improving your profit margins.

6 Treat your people right!
Virtually all employees want to work hard to help your business succeed. Treat them right, show interest in them, and compliment their every success. You'll be much more likely to not only retain them, but to keep them motivated too! Otherwise a lot of money and time can be wasted hiring and training new hires.

7 Beware the friendly salesperson!
Once you open your small business, you are instantly going to be a prime target for every salesperson within calling range. New business owners often have a hard time saying "No," until they get burned buying something they don't need. Salespeople are not here to help you! They are there to separate you from your cash! Chances are that when you are starting or running a small business, you need your cash a lot more than you need what they are selling.

8 Worship your customers, but don't give away the store!
It is important to create good products and run an efficient business, but you also need to be responsive to the needs of customers - even when doing so may sometimes require changing the way you are currently doing business. Listen to your customers' comments, and do what you can to give them what they want. But don't give away the store! Be sure that at least over a period of time, you are realizing a good profit with every customer, no matter how much they spend!

9 Have fun!
Just because many other businesses are boring stale, routine places to work doesn't mean that your business has to be too! Make work fun, exciting, and challenging for your employees, and you'll find that in addition to happier people you'll have less turnover and higher productivity. Besides - you just might have a little more fun too!


Boost Your Profits

Quick Ways To Boost Profits!
"Too often in business we get trapped into equating sales with profits. Yet there are many other ways you can dramatically impact your profitability!"

Underpricing Kills Profits!
Many small businesses have thinner profit margins than larger firms do because they tend to underprice their products or services. So why not just raise prices? I know the feeling--you're scared that your competition might swoop in like a bird of prey and your customer base might shrivel overnight!

Is The Marketing Working?
You've probably heard the familiar maxim: "Twenty percent of my advertising brings in 80 percent of my business, but I don't know which 20 percent!" Well, I bet that in your business there is at least one marketing expense that you have a strong suspicion isn't carrying its weight--so cut it and see what happens!

One year I tried cutting three-quarters of the promotional budget for my leading book. What happened? The sales continued to creep upward, and the profit margin of the entire company jumped markedly higher.

It's often by eliminating the marketing expenses previously considered most sacred that you gain the most. For example, in the book industry many of the leading publishers have recently stopped participating in the annual national trade show--it simply was costing them too much money for too little return.

The Easiest Way To Profits
Let's say your overall profit margin is 5 percent--not an uncommon level for many smaller firms. But if you can cut your costs by just 5 percent, your profit will double. On the other hand, to get the same increase by boosting sales, you would have to increase sales by 100 percent. Chances are that cutting costs just a little bit would be a lot easier.

To attack your costs take a look at every single expense item starting with the biggest items! Get competitive bids for every product and every service that you buy!

Remember, despite what they may teach you at business school, there is no such thing as fixed costs! Often lease rates, mortgage rates, and utility rates can be negotiated downward, especially if the market has shifted.

Review Your Product Mix!
A seasoned banker once told me about a firm with several highly profitable divisions and one marginally profitable division. The company sold the marginally profitable division, and suddenly the performance of the remaining divisions dramatically improved!

Even a marginal business or product line that isn't losing money is draining resources-time and focus. Close it and move on!

Outsource Judiciously
One of the battle cries in business today is to determine the one thing that your business does best, become even better at it, and outsource absolutely everything else. There is certainly a lot to be said for taking a careful look at every function in your business and asking yourself if you should outsource it. But take a hard look at the numbers before you decide to jump on the outsource bandwagon!

For example, we hoped that by outsourcing the warehousing of our books to our printer in the Midwest we could save lots of money in freight costs. But a careful analysis showed that we would save almost nothing in freight costs and that outsourcing would have nearly doubled our warehouse and handling costs.


Firing Employee

The Lowdown on Firing Employees
Of all confrontations with an employee, the response you get from firing someone is the most difficult to predict. One employee may thank you for giving him or her the opportunity to work with you, while another may attempt to engage an immediate supervisor in a fist fight.

You need to prepare carefully before firing someone. You need to be ready to become fully engaged in what may become a very demanding encounter.

How you handle a firing will have a tremendous impact on how the employee feels about himself, you, and your company. This will, in turn, effect your chance of being sued. In addition, a poorly handled firing will have a negative impact on morale throughout your entire organization.

The decision to wait on a firing

How much time should you give an employee to improve his or her performance? There really aren’t any specific guidelines. One thing to take into consideration, however, is the employee’s length of service with your company. Loyalty does count. Give an employee who has served you for several years a few months to work out his or her performance deficits.

Remember too, that when you fire a long-term employee the negative effect on the morale of other employees will be far greater than, say, if you were to fire a recent hire. And when you work together with long-term employees in an effort to help them improve their job output, and ideally keep them gainfully employed, you create goodwill throughout the company.

On the other hand, if an employee shows poor work habits, has unsatisfactory skill levels, or displays attitude problems during the provisional ninety-day employment period, don’t hesitate to fire him or her. (But beware of the legal risks—the courts do not recognize “provisional” employment periods.)

The decision to fire

While firing should definitely be a last-resort measure, many managers, especially newly minted ones, hesitate to terminate an employee until it is long overdue.

How to Fire an Employee
After you have taken all of the preliminary steps, considered all of the potential ramifications, legal and otherwise, and have made the difficult decision to let someone go, stick to it. Don’t torture yourself. Don’t prolong the firing. It is, after all, inevitable.

Only the worker’s direct supervisors, and any witnesses that will be present at the termination meeting, should be told about the termination decision in advance. An advance leak of a firing can only worsen the situation.

In the past, late Friday afternoon was considered the optimum time to let someone go. Today, earlier in the day or even the week is deemed appropriate. Some companies that take this approach offer the employee the option of either remaining for the rest of the day or week or leaving immediately with pay for the workday.

When you are ready to proceed with the termination, call the employee into the office. Approach him or her with “I have something to discuss with you.”

After the employee and any other managerial personnel or witnesses have gathered in your office, get to the point quickly. Briefly explain to the employee that he or she is being fired. Summarize the main reasons for the firing, recap the warnings that have been issued, and the opportunities extended to improve his or her performance record. Give the person a check for monies due. If you are offering severance pay, detail the severance offer and present the employee with the forfeiture document to be signed if the severance is to be paid. Explain any continued work options. Offer to let the employee clean out his or her office or desk now, or have you mail any personal belongings to him or her later. If the employee elects to have you mail his or her belongings, have two people oversee the cleaning process to be sure that all of the employee’s personal possessions are mailed.

Show appropriate sympathy for the employee, but not empathy. Do not waiver and change your mind. Do not overstate any aspect of the employee’s performance.

Answer any question the terminated employee may have, even if he or she interrupts you. A termination is extremely emotional. Don’t be surprised if the employee doesn’t hear the basic message or doesn’t understand the details of his or her firing. You may have to restate all or part of the termination.

As long as the employee doesn't lose control, extend him or her every reasonable courtesy. Certainly give the person an opportunity to say good bye to coworkers. He or she will only call these people up on the phone later anyway.

If the employee does lose control and becomes verbally abusive, ask him or her to vacate the building. Don’t get upset. Remember, no matter what you think of the employee, that person is being terminated. He or she is leaving, not you.

Even if you or someone else in the office can overpower a suddenly violent discharged employee, the risk of a lawsuit is huge. The one time I did call the police, the employee fled the building before they arrived. But the (Boston) police told me its policy was not to refuse cancellations on this type of call because all too often the discharged employee returned with a weapon. In this case, the employee did return with his dog—but the dog was about the size of a miniature poodle, with about the same level of ferociousness.

The odds of you or another employee being endangered during a firing is slim, but you do need to be prepared for the unexpected.

As demonstrated throughout the section on problem employees, by carefully working with an employee many performance shortcomings can be resolved. An employee’s job achievement can be improved through care.

If these “gentle” tactics don’t work, however, you must move on to a firm verbal warning that makes mandatory a work quality or attitude improvement and cites specific suggestions for effecting such an improvement. If that fails, issue a written warning. Some people just require the jolt of a firm warning to shift their work performance into high gear.

Of course, during the period when you are working with an employee in an attempt to improve their performance, you run the risk of having them decide to seek employment elsewhere. This risk increases if a written warning is handed down. If the employee quits or submits his or her resignation, that’s OK. It is a lot easier to lose weak performers through their own proactive decisions.

Avoiding a Lawsuit
The first way to avoid getting sued is to be sure that you and all other supervisors understand discrimination law. Go one step further and be sure that all supervisors really believe in the importance of fighting discrimination—both on a practical and a subconscious level.

You need to remember that abiding by the law and being able to prove to a hostile jury that you have done so are two very different things. If you end up in court, you need to have a rock-solid case against any employee you fire. You should take whatever preventive steps you can to avoid the possibility of a suit altogether.

Create a paper trail long before termination is seriously considered. Write summaries regarding specific performance problems that were cited via direct verbal warnings to the employee and file a copy in his or her employment records. Be sure that you have issued the employee at least two written warnings.

If the employee knows and appreciates that you have tried to work with him or her towards improving such job performance, this can decrease the chance of a lawsuit.

How you handle a problem employee’s performance reviews are critical. The recent reviews should not be positive. This is often a problem because employers, supervisors, and managers hesitate to write and present to an employee a negative review, even if such a review is warranted. If, during the review process, you give into the human temptation to say something like “your work really isn’t all that bad” or “I know your work is improving,” you are planting the seeds of a discrimination suit.

Another potential problem you should be aware of is how you handle reference calls for a former, and fired, employee. If you give out any information on such an employee, other than dates of employment and a salary confirmation, you risk a lawsuit. There was even an instance where a company lost a suit brought by a terminated employee because a good reference was supplied but the employee felt, and the jury agreed, that the reference wasn’t good enough!

Hypothetical Firing Dialogue
The following dialogue provides an excerpt from a firing that involves an employee who had sincerely tried to do his job but just hadn’t been able to perform at a satisfactory level. Note how the manager shows patience and expresses sympathy but does not offer false praise or waiver in his decision. In this excerpt one manager is handling the termination procedure. It is good practice, however, to have another manager present. Ideally, the second manager should not be someone the employee reported to either directly or indirectly. If the firing does not go smoothly, the second manager can be called upon as a witness should any legal action ensue at some later point.

Manager- Tom, please have a seat.

Tom- Thank you.

- Tom, I know that you have tried hard to succeed at your job. Nonetheless, for some months now, your overall performance has not been satisfactory. There are too many instances of errors in the accounts payable reports and your attempts to carefully check over each report have slowed down the pace of your work considerably. We cannot retain you in this position and we must let you go.

Tom- You mean, I’m fired?

- Yes, that is correct. I am very sorry that this did not work out.

- I know I can do the job. Give me another chance. I really like working here.

Manager- Tom, we have given you at least two written warnings and several verbal warnings.

- But my supervisor says the quality of my work is improving.

- While the number of errors has decreased, the quality is still not satisfactory. And in working to decrease the amount of errors your work pace has become unsatisfactory. I know you have tried . . . but it’s still not working out.

Tom- What about another position? I’ve never really liked payables. How about the entry-level position in accounts receivable? I’ll really give it my all.

Manager- Tom, it’s time to move on. We all like you here. This is a difficult decision for all of us. But the decision has been made. We truly wish you the best.


Hiring Staff

Hiring Top Performers
"If you're trying to achieve excellent levels of performance in your organization, it's going to be a lot easier if you hire terrific people in the first place."

Re-Evaluate The Job Before Hiring
If you're going to grow your company or achieve excellent levels of performance in your business unit, it's going to be a lot easier if you hire top performers to begin with, rather than if you have to be constantly pushing and pulling average performers to new levels.

Before you even place the first "Help Wanted" ad for a vacant position, you should do the following:

* Re-evaluate the mix of responsibilities assigned to the position.
* Consider if the current people are assigned to the most appropriate positions.
* Prioritize the "must have" qualifications for the job; the important qualifications; and the helpful, but less important, qualifications.

Don't Just Run A "Help Wanted" Ad
Where should you advertise to attract new help?

"Help Wanted" ads and employment agencies, both of which can be expensive, are obvious places to start. Here's a few other suggestions:

* Encourage current employees to mention the opening to friends. Consider offering, like many other companies do, a referral bonus.
* Put up a sign on your building--we've attracted many warehouse workers this way.
* Especially for professional and technical positions, advertise on the World Wide Web--for example, at the job posting site operated by Adams Media (called careercity.com) over 125,000 jobs are posted from thousands of different companies across the United States
* You can also access resume databases. Careercity, for example, has over 17,000 current resumes. Resumes on the Web tend to skew toward technical people, but the breadth of resumes being posted is gradually widening.

Quickly Categorize All Applicants
Over the years I've wasted huge amounts of time in the hiring process. So how does one become more efficient? Here are a couple of strategies I've adopted:

* Immediately sort all candidate resumes into five categories, from the very best to the completely unqualified, and keep every resume sorted this way during the entire hiring process-moving resumes from one category to the next when new information makes this appropriate.
* Spend as little time as possible in the early stages of the hiring process eliminating the clearly weaker candidates from consideration, but spend as much time as possible in the final stages of the hiring process sorting out the more subtle differences between the very strongest candidates.

Phone Interviews Save Time!
One of the biggest time-savers in hiring is the phone interview. The best part about phone interviews is that there is no established protocol for minimum length. If you don't like the candidate's first few responses, you can simply say, "That's all I have for today," and move on to the next candidate.

Some hiring experts stress the importance of allowing the candidate advance notice to arrange a phone interview. But personally I prefer the candidate who's ready to drop whatever they're doing and talk to me on the spot.

During a phone interview, I like to get quickly to the knockout questions like availability, willingness to relocate or travel, and especially salary. If the candidate won't give me a salary range over the phone, I won't have him or her into the office for an interview.

Beyond The Standard References
How do you choose between top job candidates? References are a starting point, but I find that references supplied by candidates are becoming less useful every year--companies concerned about legal liability refuse to give references altogether, and many supervisors sugarcoat the performance of even employees that they've just fired. I put much more weight on whatever kind of reference I can find on my own--maybe from a coworker, a former customer, or someone who knew the candidate through a trade association.

I also like to simulate the actual work that the employee will perform. Typing tests, accounting tests, and sales and management decision-making scenarios have helped me make hiring decisions.

Even if the employee will report to me, I always get plenty of input from others, which also makes people feel more accepting of new hires.

Attracting Candidates

World Wide Web
More and more often jobs are being found through electronic job banks such as Adams CareerCity, which you can access through the World Wide Web at www.careercity.com. At this time companies may place ads for professional openings at no charge. Call 781-767-8100 for more information, or fax us your classified ad at 781-767-2055. Electronic job banks such as Adams CareerCity are particularly effective for filling technical and career-oriented professional positions.

Regional newspapers are the most traditional way to attract job applicants. Particularly for major metropolitan newspapers, even small ads can be fairly expensive.

Trade Publications
In some industries you may want to try a trade publication that targets your industry or a specific niche in that industry.

Professional Groups
You may want to try sending a one-page job description to all professional groups and associations you belong to that publish newsletters or regularly post openings either on-line or at the association's headquarters.

Use the phone to network among colleagues in the industry and your peers in competing organizations; ask them for ideas to use when locating candidates for your openings.



The Art of Finding Your Unique Selling Proposition
Positioning is about making your offering different from, and more valuable than, your competitors' offerings--and placing that idea in the minds of a target group of customers. Positioning attracts customers by creating a positive and unique identity for your company and its offerings. Positioning is vital for distinguishing your offering from everybody else's.
In a world where there are more and more products and services every day, your customers are on advertising overload all the time. So they pick something to believe and hold that notion until a message breaks through and persuades them to change.
People can't hold warring ideas in their heads. They can't believe that the Norton Anthology is the best study guide for English literature, then study from a set of Cliffs Notes and believe they're doing the best they can to pass their exams. They can't believe that all paper towels are pretty much alike, buy one that costs more than most, and think that they are wise shoppers. The point is, positioning is your effort to claim a high ground in that overloaded prospect's head and hold it against competition.
There may be very little difference between your product and your competitors'--but if you can't find a way to communicate uniqueness and connect it to a need of your target, you might as well quit fighting your competition and sell out to them. There are many different ways to stake out a position. Just remember, your position reflects your unique selling proposition, and it is what makes your offering more valuable to your customers than what's being offered by your competition.

Perception of your Business
How will your business be perceived as different from your competition in the minds of your targeted customers? To figure this out, you must look for your best customer and then design a position that matches his or her wants and needs to an advantage that only you can offer. Remember, you can't be all things to all people, but you can be the vendor of choice for a group of them.
Positioning Affects Every Aspect of Your Communications--And Your Business
Positioning is the basis for all your communications--your packaging and product design, sales promotions, advertising, and public relations. Everything you do must reinforce that position--otherwise you just undermine your marketing efforts and sow confusion instead of confidence. Positioning is serious business. You must choose the right position, for now and down the road.
Do the work now to develop a clear position for your business vis-à-vis your competitors. You'll ensure that you get the most from your advertising budget. The truth is that with enough money, you can buy success in advertising. Mediocre, unfocused messages from a company without a clear position will generate sales surprisingly well if that company buys enough time or space to pound the message home. But think how much farther that budget could take you if you had a focused message, a unique selling proposition, and a target audience for your offering. Positioning--and the creative approach that grows from it--make the difference.

Developing the Positioning Statement and the Tagline
To begin creating your own sense of positioning for your business, answer the following questions with short, articulate answers that relate your offering to your customers' needs.
1. What does your business do?
2. For whom?
3. What is your biggest benefit to them?
4. Prove your claim. To what do you attribute that benefit?
5. How will your customers perceive this benefit, relative to the competition?

Promotions: Do They Have a Place
When your mechanic sends you a coupon for a discount on an oil change, or your local coffee shop rewards you with a free cup of coffee every tenth time you buy, you're seeing a promotional program at work.
A promotion is a planned strategy for increasing sales over a short period. A promotion adds value to the product or service offered. It stimulates sales for reasons other than the product's inherent benefits.
We call those reasons incentives. Sometimes the incentive is designed to specifically make a sale, as in "$2.00 off medium pizza with this coupon." Other times the incentive is planned simply to expose the customer to the product--to break down preliminary barriers that are roadblocks to a future sale.
With a promotional program, you can persuade people to try your product, to experiment with new beliefs about your service; you can shift buying habits so that light users find reasons to buy more.
Who uses promotions? There are business-to-business promotional programs, and there are consumer programs. We'll talk mainly about consumer programs. The concepts we'll discuss are really about the same for both. Remember, people do business with people. It's just a matter of what market you're trying to influence--end users or intermediaries.
Different businesses are drawn to different styles of promotion. The most frequent users of promotional programs are the retail services, like car care, hair care, and restaurants. Coupons are the most common promotion for these types of businesses; dry cleaners use coupons extensively, and so do groceries. It's the ability to track results, as well as their proven effectiveness, that makes coupon offers so popular.
In the business-to-business world, suppliers frequently engage in promotions by offering sale prices. You are less likely to see coupons here, because the patterns of purchasing are a little different. The person making the decision to buy may not be the same person who is writing the check, so requiring the physical coupon to be used would be an unnecessary barrier to the desired sale.
Promotions work because people like something for nothing. They respond to two-for-one offers, and they love a good deal or free extras with their purchases. Special promotions help lots of businesses achieve their marketing objectives, such as combating seasonal cycles or stealing attention from the competition.

Media Plans
The largest category in your advertising budget is likely to be your media costs--the dollars you spend for air time on radio or for ad space in newspapers, magazines, and more. Because of this, it makes sense to have a sound plan to manage that investment. You'll want to set goals. You'll want to describe strategies for achieving them. You'll have to organize the day-to-day tasks of carrying out the strategies. The tool you'll need to do this is a media plan that begins with an overview and works its way down to the details. It will help you with every phase of your advertising.
Here's how many businesses manage their media buying. The person in charge of the budget starts saying yes to the salespeople who call. Advertising appears here and there as a result. When the budget's gone, the person in charge starts saying no, and the ad campaign is over. It's a method, but you wouldn't call it a media plan. And if that approach sounds familiar, you can bet you're passing up opportunities to maximize your return on investment.
Media planning is the process of choosing a course of action. Media planners develop yearly plans that list each media outlet--print or broadcast. Planning then gives way to buying, as each separate contract is negotiated, then finalized.
The media plan is a document in sections. A ring binder notebook is a good way to keep a media plan, because it's easy to update and easy to refer to. Or if you prefer to work on computer, simply think in terms of folders and files. The sections in your notebook will be:
• Media outlets (newspapers, etc.). This section lists all of the media in which advertising will be placed.
• Goals. This section describes the goals of the advertising, and explains why and how this plan meets these goals.
• Audience. In this section, collect all the information you can about your target audience. You will want statistics by demographics or lifestyle; your professional association can help you find this information, as can trade journals or your banker. Look for any relevant articles or information about your potential buyers. Pay attention to everything that helps you imagine an individual buyer who is typical of the whole.
• Strategy. You will write a statement of strategy backed up by a rationale. The action steps you describe here will guide a year's activity.
• Budget and calendar. Your media plan will outline what money is to be spent where, and when.
The document you've compiled in this notebook guides you in the execution of the plan throughout the year.
Over time, these plans provide a history of your advertising. If you make alterations to the schedule in the course of the year, be sure to record those decisions in your notebook. Ring binders make it easy to update your plan as it evolves.
When you've finished this section, you will have an overview and the tools you need to create a media plan for your business. Let's start with basic vocabulary. The term you'll hear most often is CPM, or cost per thousand. CPM analysis is the method media buyers use to convert various rate and circulation options to relative terms. CPM represents the cost of reaching one thousand people via different types of media. To calculate CPM, you find the cost for an ad, then divide it by the total circulation the ad reaches (in thousands). By finding this information and calculating this cost for each of your options, you can give them a numerical ranking for comparison. CPM is a basic media concept.
Print advertising prices are based on the circulation of the publication in question. Publications will quote you a circulation figure based on paid subscribers. The audited circulation figures are verified by monitoring organizations. The publications will try to convince you that actual circulation is higher by including the free copies they distribute and the pass-along readership they claim. Sometimes these claims of "bonus" circulation are valid--for example, magazines distributed on airlines get at least eight readers per copy. Still, you should be wary of inflated circulation figures.
Audience is the equivalent of circulation when you're talking about broadcast media. Audience size varies throughout the day as people tune in and tune out. Therefore, the price for advertising at different times of day will vary, based on the audience size that the day-part delivers.
Penetration is related to circulation. Penetration describes how much of the total market available you are reaching. If you are in a town with a demographic count of 200,000 households, and you buy an ad in a coupon book that states a circulation of 140,000, you're reaching 70 percent of the possible market--high penetration. If, instead, you bought an ad in the city magazine, which goes to only 17,000 subscribers (households), your penetration would be much less--8.5 percent. What degree of penetration is necessary for you depends on whether your strategy is to dominate the market or to reach a certain niche within that market.
Reach and frequency are key media terms used more in broadcast than in print. Reach is the total number of people exposed to a message at least once in a set time period, usually four weeks. (Reach is the broadcast equivalent of circulation, for print advertising.) Frequency is the average number of times those people are exposed during that time period. To make reach go up, you buy a wider market area. To make frequency go up, you buy more ads during the time period. Usually, when reach goes up, you have to compromise and let frequency go down. You could spend a lot of money trying to achieve a high reach and a high frequency. The creative part of media planning comes in balancing reach, frequency, and budget constraints to find the best combination in view of your marketing goals.
In developing your media plan, you will:
• Review your marketing objectives through the "lens" of media planning.
• Review the options available.
• Evaluate them against your objectives.
• Set your minimum and maximum budget constraints.
• Create alternative scenarios until you uncover the strategy that accomplishes your objectives within those constraints.
• Develop a schedule describing ad appearances in each medium.
• Summarize your plan in the form of a calendar and a budget.
• Negotiate with media representatives to execute your plan.

Tips on Negotiating Rates:
Prices for print advertising are fixed, as the print media can be flexible in matching supply with demand. They have expandable space; if they sell more advertising than usual, they can print more pages.
Your negotiations with print media will revolve around what other services they can offer you, such as reader response cards, additional ads in a special issue, special position, free color, and so on. You will probably not be able to negotiate an actual discount off the rate card.
Prices for radio are negotiable, because the amount of inventory is fixed. There are only so many minutes between the programs themselves that can be sold. If there is competition for those minutes, the price goes up. The effect is really noticeable when there's a sudden surge in demand for commercials.
Spring is the beginning of the broadcast media buying season, since networks issue their fall schedules in May. Networks like to get money early, so to encourage you, they will usually offer attractive package deals at this time. This is the best time to negotiate for overall lowest cost.
Opportunities come up throughout the year as other advertisers change their plans. You can make good buys at any time, but the deal might be structured differently. If you got a call from a radio station tomorrow saying that it has a highly prized time slot available during the morning newscast, and it will cost only $22 per spot, but you've got to decide fast, would you have an answer ready? A good media plan can help keep you focused on how that deal fits into your overall strategy. If it delivers an audience you want, and if it's available at a price that fits your budget, you're in business. It helps to have a well-documented plan to assist in these fast-breaking decisions.
If you plan to use broadcast media heavily, I recommend that you work with an agency or media service. Those who know the territory thoroughly and are working on your behalf will be better able to find the best buys.
If you are buying your media time and space yourself, here are some tips:
• Be sure your chosen medium delivers your target market. The media sales reps are expert at putting their offerings in the best light. Everybody can find something to claim "We're Number One" about. You don't care. Does the medium deliver the audience you want to reach? That's the key question.
• Beware of bringing your personal biases to your media decisions. Don't buy a certain radio station just because you listen to it--ask instead if your potential customers do. And it works the other way, too. Don't not advertise in a certain newspaper just because you hate one of its reporters.
• Look for verifiable information from your sales reps. Audience size, share, gross rating points--these calculations should be based on information from third-party ratings sources. Beware of any statistic described as "estimated"--ask about the source for that information.
• Representatives from the various media will call on you; no matter what the title on their business cards, they are salespeople. Do not allow them to make your decisions for you. High-pressure sales techniques are fairly common. Rely on these people for information, but do your own calculations, and make the decisions that are right for you.



Many of the small-business managers I know view accounting this way. It's overhead and really doesn't contribute to the bottom line. Or does it? The people who run the accounting system speak in an unintelligible blur of debits and credits. They have little grasp of the operation that generates the money to pay their salaries.
Sound familiar? Maybe you're one of the entrepreneurs who share these thoughts. Welcome. I'm not out to convert you to the good of accounting. However, my guess is that once you see how to set up an efficient accounting system for your small business-one that really does contribute to overall profitability-you'll convert yourself.

Information Means Profits
The purpose of the accounting system is to communicate. It produces useful information (not raw data) that tells specific things about the company. To those who understand what this intricate system is saying (and you'll be one of them by the end of this book), it's like money in the bank.
Suddenly, information that you need to run the company is at your fingertips. Of course, this information is couched in financial terms. That's the language your accounting system uses. But it's not complicate.


What do you want from your accounting system. This feedback must
• Be accurate
• Fulfill management's requirements
• Be easy to use
We can employ information like this in solving problems and running the business. As well as having the attributes of accuracy, relevancy, and simplicity, our accounting system ought to be set up in such a way that it does not require an inordinate amount of time to maintain. Remember, you aren't an accountant, and we don't want you to spend your time trying to do accounting.
Further, your accounting system should not require a CPA to operate it or to interpret the output. Some of the popular automated accounting systems require specific knowledge not only about computers but about the field of accounting as well. Make sure that those running the system have the background needed to install and operate it. If they don't, get a package that is more in tune with your firm's capabilities.
Further, if you are using an automated accounting package, it must run on the computer equipment that is either currently in place or to be acquired in the near future.
If you choose to use an automated accounting system, this book will be of immense help in teaching you the basics of how it works. Whether manual or automated, all accounting systems use debits, credits, a general ledger, and sub ledgers. All entries are posted the same way. The only difference is which buttons to push. The last chapter demonstrates methods of selecting the proper automated accounting system for your company.

The business cycle is nothing more than the flow of transactions needed in your business to complete a sale and collect the proceeds. It's important to setting up your accounting system. We want to know what types of transactions are involved and the accounting entries to make along the way. Most companies business cycles progress something like this:
1. Purchase raw materials.
2. Enter goods into raw materials inventory.
3. Begin the manufacturing or assembly process.
4. Enter goods into work in process inventory.
5. Pay suppliers or pay employees (at service companies).
6. Complete the manufacturing or assembly process.
7. Enter goods into finished goods inventory.
8. Sell the inventory.
9. Collect payment for credit sales.
Briefly, here is the way your accounting system interacts at each stage of the business cycle.

Purchase Raw Materials
What happens when you buy the raw materials used to create your company's product? You receive the goods, and you either pay cash for the goods or obligate the company for future payment. Both transactions require these accounting entries:
• Increase raw materials inventory
• Decrease cash (if you paid on the spot)
• Increase accounts payable (if you didn't)
At this point, we've covered the first two steps of the business cycle listed above.
Begin the Manufacturing Process
When we use raw materials to make our product, the accounting system transfers the inventory from raw materials to an intermediate stage called work in process (WIP for short). This transaction explains the third and fourth steps of the business cycle.

Pay Suppliers
Sometime during the production process we must pay our suppliers if we bought the raw materials on credit. The accounting entry for this transaction does two things:
• Reduces accounts payable
• Reduces cash
Complete the Manufacturing Process
At last, we have completed our manufacturing process. Now we can move the product from the work in process inventory to the finished goods inventory. This transaction particularly interests the sales staff, since it means that the product is now available for sale, and that's what generates their commissions. The entries into the accounting system that record this event go like this:
• Reduce work in process inventory
• Increase finished goods inventory
We've now completed the sixth and seventh steps of the business cycle.

Sell the Product
At last we're ready to make a sale. If it's a credit sale, our accounting system must record these transactions:
• Reduction in finished goods inventory
• Increase in accounts receivable
• Increase in sales revenue
If this was a cash sale, replace the increase in receivables with an increase in cash. We just finished the eighth step of the business cycle.

Collect the Receivable
The final stage of the business cycle is conversion of the receivable (which is an asset) into spendable cash. When the customer pays, the accounting system records a decrease in receivables and an increase in cash.
This ends the business cycle and the various accounting transactions involved. The accounting system we're setting up will cover every one of these transaction


Biz Funding

Lease Financing
Leasing is a super financing alternative if you are seeking funding to obtain business equipment. Finance companies, banks, and many firms that sell high-priced equipment will lease to you.
When you lease an item, the lessor retains ownership of it. You use the equipment by virtue of the monthly payments you will be required to make. You can often purchase the equipment at the end of the lease term for its market value or less.
A great advantage to leasing is that it may be allowed to be "off the balance sheet." This means that leases can be disclosed as balance sheet footnotes. They do not appear as debt even though they represent an ongoing company liability. This may sound like financial doublespeak, but it's not. Let's say a supplier is considering whether or not to extend credit to you, or a bank is weighing a loan proposal you have submitted. The lease commitment will play a relatively minor role in evaluating your debt burden.
Banks also tend to consider their total exposure when lending to small businesses. If you have obtained lease financing through a third party, they are more likely to lend you funds than if all of your borrowing needs have been met through them. This is very important if you have a relatively small business, because most banks expect you to use them exclusively for traditional lending but may not care if you use a nonbank source for lease financing. In any case, though, do keep your bank informed regarding any significant lease commitments you are considering prior to actually signing any agreements.

Venture Capital
Despite all of the attention venture capital firms get in the business press, they actually finance very few businesses. The better venture capital firms are deluged with proposals from budding entrepreneurs. But most of these entrepreneurial proposals are inappropriate to the goals of venture capitalists.
Most venture capitalists concentrate their financing efforts on later-stage business funding. Some venture capital firms will, however, consider financing a start-up. What they want to see from any entrepreneur seeking funding is a history of start-up successes under the applicant's belt. They are best known for financing high-tech firms, but they do finance other types of businesses over 50 percent non-high-tech businesses for some venture capitalists.
Venture capital firms prefer to cut deals that provide an exit path within five years. They view the probability, or not, that a firm will be successful enough to go public or be purchased by a larger company. They also expect very high returns for their investment risk that only the fast pace of highly profitable growth will bring. They want to see a management team in place that can handle rapid growth. And they want that management team to be well balanced with all types of experience and skill represented creative, engineering, financial, marketing, and management.

Going Public

Going public, that is, selling stock or debt to the general public, is an extremely complex and massive undertaking. You should not consider going public unless your business is earning high after-tax profits, has steady profitability, excellent growth prospects, and a tremendous thirst for funding that other sources can not provide.
Entrepreneurs who have taken their firms public are generally shocked by the amount of energy and anxiety that goes into the initial public offering. And, later, they are frustrated by the added demands placed on them as a CEO of a public as opposed to a private firm.

Personal Loans
Personal loans are a great back-door alternative when seeking financing for a small business venture.
One of the most common means for attaining funds for use in operating a small business is through a home equity loan. If you have been paying your mortgage for a few years, you have probably built up some sizable equity in your property. Banks loans taken against a person's primary residence are low-risk no matter what the funds are going to be used for. You can take the proceeds garnered from a home equity loan and use them to operate your business. Then, technically, you are financing your business, not the bank.
If you use the proceeds from a personal loan to finance your business you do, however, need to make this clear on your loan application. If you lie on a loan application you have committed fraud a serious criminal offense.


Business Loan Glossary

Accounts Receivable Financing - A loan gained by borrowing against receivables. Loans are paid down as receivables are collected.

Annual Fee - The amount charged by the lender each year to cover the administrative costs of the loan.

Business Credit Card - An amount of money, which a business can borrow against at times it needs capital. Using a card accesses the money.

Commercial Real Estate Loans
- Similar to residential mortgages, but collateral is business property. Interest rates are usually fixed, the length of the loan can range from 5 - 20 years and payments due monthly.

Commercial Term Loans
- Loans made to businesses that can be either secured and unsecured. Usually made to mid-size and large businesses.

Credit Rating
- A predictor of the ability to pay back a loan. The credit rating is a result of credit scoring

Credit Report
- Financial history supplied by a credit information company. Contains credit information on a business or an individual, including payment history of bank cards, store cards, mortgages, student loans, and trade payments.

Credit Scoring
- The evaluation system used by lending institutions to determine relative credit riskiness of a business or consumer. When evaluating businesses, it generally considers factors such as credit payment history, new credit sought by owner of business, and financial strength and longevity of business.

Debt Financing
- A loan with pre-agreed terms, including payback schedule and interest.

Equipment Leases
- Leases allowing companies to purchase new equipment.

Fixed Interest Rate - An interest rate that is the same throughout the life of a loan.

Interest Rate
- The amount charged by a lender for the money borrowed. It can be fixed or variable.

Inventory Financing
- Money borrowed on the basis of finished inventory. The loan is paid as inventory is sold.

Line of Credit - An amount of money, which a business can borrow against at times it needs capital. Often accessed by check, ATM, or business card.

Loan Term
- The length of time the borrower has to repay debt.
Long Term Debt - Financing used to purchase or improve assets such as plant, facilities, large equipment and real estate.

- A loan's maturity is the life of the loan; that is, how long you have to repay the loan. It usually applies to term loans and not lines of credit.

Multi-Lender Environment
- Numerous lending institution sharing the same site and information to provide instant financing to small businesses.

Personal Guarantee
-A guarantee that the primary owner will assume personal responsibility for repayment of the loan, should the company not repay the loan.

Prime Rate - The rate a lender charges its best customers. The rate is calculated differently by each lender.

Revolving Credit
- It is the same thing as a line of credit: an amount of money, which a business can borrow against at times it needs capital. Often accessed by check, ATM, or business card.

SBA Loan
- Loans to small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders that provide loans, which are guaranteed by the Small Business Administration (SBA) -- the SBA has no funds for direct lending or grants.

Secured Loan
- A loan secured by specific collateral. Creditor may foreclose and seize the specific property that is collateral to satisfy an unpaid secure loan.
Short Term Debt - Financing used to secure cash for accounts payable and inventory.

Subsequent Draw Fee
- It's a fee that the financial institution may charge each time you use the line of credit after the initial use.

Term Loan
- A loan for a specific amount of money. It has either have a fixed or variable interest rate, matures in between one and ten years and has a set repayment schedule.

Unsecured Loan
- A loan granted upon the good credit of the borrower. No collateral involved.

Variable Interest Rate
- An interest rate that changes during the life of a loan.


Business Plan

"Why plan? It only gets in the way of what would have happened anyway." That's a fatalistic notion often held by managers of small businesses. Too many believe that they're totally at the mercy of larger competitors. In fact, for many, exactly the opposite is true.

Think of the reasons for your company's success. You'll probably come up with a series of traits that are uniquely yours-characteristics that your larger competitors can't begin to duplicate. That's why you're in business.

Of course, you may already believe in the idea. However, you may have to sell it to the others in your company. This ammunition may come in handy.

We all have an aversion to doing anything on our job that doesn't immediately help the situation we're now experiencing. However, isn't it also true that a little foresight and action before the fact can help eliminate many of the problems we face each day. Wouldn't it be nice to anticipate something like a price cut by your major competitor or a rise in the interest rate on your credit line? Of course it would. And with that anticipation comes an organized and effective response. That's what planning does. Additionally, we prepare a workable business plan to

# Determine where the company needs to go
# Forewarn of possible roadblocks along the way
# Formulate responses to contingencies
# Keep the business on track to reach its planned goals

Planning for Promotion of the Company
Many people associate a business plan with start-up companies. Often our first exposure to a business plan is for the purpose of convincing investors and lenders that we have a viable idea at which they should throw money. That's not what we're developing here.

Though the techniques may be similar, the purposes are entirely different. So are the results. Promotional plans are often untested, pie-in-the-sky theories of what someone thinks will work. The goals, objectives, and numbers are usually unproven. Detailed departmental plans for hitting targets are frequently hazy-if they exist at all. Promoters don't want to burden their investors with the mechanics of execution. That comes later, after the money is in the bank.

Think of a start-up's promotional plan as concept-driven. It's more general in nature. The presentation leaves many questions of practical execution unanswered. These plans are fine for their purpose. However, most aren't intended as a blueprint for running the company.

Planning for Operational Purposes
We're not creating a promotional plan for a new start-up company. Instead, by using this book, you create a practical realistic planning tool for your business. The emphasis is on integrating the details of what each department within the company does to help the firm reach its overall goals. We want to tell each person in the company the single most important thing they need to do-must accomplish-to contribute to the overall success of the business. Certainly this results-oriented attention to detail can (and probably should) be used for a start-up venture. However, the promoters are right-it would confuse outsiders not familiar with the inner workings of the company.

Our focus is on practical solutions to everyday business objectives. We design these to work in concert with one another. When they do, the company moves from where it is today to where its owners, investors and managers want it to be.

Why establish goals? I've heard from colleagues who run other small businesses that they always seem to fall short of any goals they set for the company. There's almost a feeling of helplessness. Their companies are small and lack the resources needed to turn goals into reality. Some wonder why they should spend time developing a business plan that might help the company make money over the next year or two-especially when they could be working on something else that's guaranteed to make money today. That's hard logic to refute, especially in a tight economy. Many small-business owners and entrepreneurs go after the quick buck. Those are the ones that don't last. Companies that lack a definite direction and the ability to stay on course eventually sink. It's the firms with vision and a plan to exploit that vision that become the stars. If you don't set goals and then try to reach them, it's guaranteed that your firm will stay right where it is today. With changing technology, changing customer demands, and increasing sophistication, marching in place is business suicide. During the 1990s and as we approach the next century, no company has the luxury of conducting business as usual. If you stay where you are today, the rest of us will leave you in the dust.

Company Goals
These are the targets for change and transition that your firm must reach over the planning horizon-for our purposes, the next twelve months. Company goals cover such major issues as

# Products offered
# Customers targeted
# Company image
# Competition
# Levels of service
# Product quality

Companywide goals established in the business plan move the company into the position where it needs to be.

Department Goals
At very small companies, often that's for one person. No matter. Design department goals to connect with specific requirements of both the overall company goals and the goals of other departments in terms of product and timing. We make department goals in order to

# Assist other departments that depend on those specific results
# Achieve the overall company goals

A good example would be in the area of finance. Say the firm needs additional funds to buy the machinery needed to expand its manufacturing operation. This will generate the sales revenue needed to meet overall profit targets. Here are examples of specific department goals:

# Get additional funds.
# Purchase and take delivery of new machinery.
# Expand manufacturing.
# Generate added sales.
# Help attain the overall profit objectives.

Failure to reach of any one of these department goals could jeopardize reaching the overall company's target. Additionally, within every department, it's easy to identify exactly what that department must do to further the company's cause.

The question here, however, is why do this? After all, most managers of small businesses are close enough to their everyday operation to know where they are, aren't they? Not necessarily. At least few take the time to think about where they are, then write it down so that others can judge its accuracy. We're talking about things like

# Market position
# Company strengths and weaknesses
# Reputation
# Industry viability
# Technology
# Product line
# Adequacy of capital
# Capability and sufficiency of employees
# Sufficiency of plant, machinery, and equipment (the infrastructure)

Often the hardest part of starting a business plan is honestly determining your current position today. It's not always so obvious. Take the case of Domino's Pizza Corporation. What business is it in? Of course, it sells pizza. So does every one of its competitors. The Domino's planners decided that differentiating Domino's product based on higher quality was too hard a sell. Besides, it wasn't necessary. So what business is Domino's really in? The convenience industry. Its pizza isn't any better or worse than most of the competition. However, the niche Domino's chose for itself in its plan was the business of selling convenience. For a while it had that entire market to itself. Another example is that of a payroll processing service. Its current position is that of providing financial convenience to its clients. The company performs a task that other companies would rather not do. While assessing the current position, someone came up with the bright idea of expanding the services offered. After all, financial convenience extends beyond simply doing the payroll. Why not add bookkeeping, tracking and collecting receivables, and personnel consulting? See how the planning process not only answers a lot of questions you may not have thought about for some time, but prompts questions that may turn into opportunities? That's the kind of penetrating thought that goes into assessing your firm's current position.


Starting a business

"You want to start your own business, but don't know were to start. Follow these steps and you'll be well on your way."

STEP 1 Business Ideas
To start a business you will need to choose or create a business idea. While this is an obvious step many people who want their own business don't have an idea, just the desire to be an entrepreneur. For the budding entrepreneur, there are many options; buying a franchise or an existing business, or looking to others for ideas for a start-up business. Once you have decided on the business you wish to start, then the real work begins.

STEP 2 Business Plan
Writing a business plan is your next and most important step, this is how you and others will evaluate your business. When seeking financing the investors or lenders will want to read your plan before they supply you with funding. If you're financing the business yourself, you will still want to have a written plan to develop business strategies and financial projections. A key element within the business plan is the marketing plan, which explains marketing strategies that will be used to advertise and promote the products or services. The goal setting steps of the plan will help you to analyze the success of the business in future years and clearly illustrate the capital needed to operate the company to break-even.

STEP 3 Financing
With your business plan in hand, you are ready to go find yourself some capital. Most small businesses have three options for financing: friends & family, investors or bank loans. Each of these options has different considerations for the business. Investors and even friends & family usually want ownership and control of their portion of the business. Bank loans burden the business with an additional expense of the loan payment, which can erode the business profits.

STEP 4 Getting started
You've got the plan, the money and the enthusiasm; you're ready, right? Not yet, as with everything you need to take the legal issues into consideration. First you should choose a legal structure: Sole Proprietorship, Partnership, or Corporation. Your financing decisions will have an effect on what legal structure you choose. Now you can file with the state to incorporate and obtain a federal Identification number.

STEP 5 Opening the Doors
Okay, it's time to get on the road to making some money; this of course means spending money. Where are you going to run your business? Will a home office do or is commercial space needed to service your customers? Do you need to hire employees to help you run the business? What are your bookkeeping needs, do you need an accountant? Finally, who could forget taxes, what taxes do you have to pay and collect? Now that your business is through the start-up phase, you can now look forward to the issues of managing a small business.