Business Banking E-Newsletter - September 2013

Where Small Businesses Waste the Most Money

Managing a budget is one of the toughest challenges small enterprises face, especially as new—and potentially pricey—ideas arise and unexpected expenses pop up.

Joanne Chang: Spend as if It Were Your Own Money

From my experience, easy money is wasted—i.e., money that is not yours. If it is yours, you will watch every penny. Instill in your managers and those who have buying power to act as if the money is coming out of their own pocket to try and ensure they do their research and don't spend on things that your company really doesn't need. Money is also wasted when you spend on projects that have not been well thought out. Don't throw money after an idea just because you've already spent some money on it—cut your losses quick and don't let your ego keep you spending more than you should on an idea that simply wasn't right. For everything you spend money on, ask yourself how it will help your bottom line—if you can figure out a direct correlation, then it's probably worth considering. But if you can't, then you better have other equally important reasons for spending the money (i.e., charity, speaks to your values, etc.).

Mary Liz Curtin: Those Little Costs Add Up

Grand ideas and loose controls are the biggest problems. Before you make money, don't decorate the office! Every penny you spend, especially at the beginning, has to be watched. Often a person who has come from a big job has a little trouble adjusting to traveling in coach and staying in hotels with few or no stars, but if you own a business you have to be very tight with everything.

The small expenses add up quickly, so auditing basic costs, from travel expenses to utility costs, is essential. I have noticed that when someone says, "You have to spend money to make money," he is usually about to blow the budget for something that he cannot justify. All the little things can really add up, and it is very easy to let it get away from you.

Investing in the business wisely is important: Pay your people as well as you can, keep your inventory levels where they need to be, learn to buy for maximum margins and be sure you don't skimp on the things that are essential to your business, but weigh each expenditure carefully and teach your staff to do the same.

In our retail store, Leon & Lulu, my husband's unbelievable thriftiness has played a major part in our success and profitability. It is much more fun to spend money on a holiday dinner for the staff than see it slip away on wasted office supplies or high freight costs. We are penny pinchers and proud of it.

James Schrager: Get Rid of Bad Hires Early

On people who turn out not able to do the work. The best hires surprise you from the moment they come onboard. Not with perfect work, but with their ability to quickly grasp essentials and respond. They also surprise you with how fast they can learn. If you don't see this early, you're wasting your money. It's never fun to fire people (except perhaps for Mr. Trump, who seems to enjoy it), but it comes with the job of being in charge.

Richard Duncan: Do What You Do Best—and Hire for the Rest

Many small businesses have owners working hard in their business but not on their business. It is imperative that you find staff support in your weak areas and the busy work to run your business (the things you just don't enjoy or at which you don't excel). You must place a high value on your time as a business owner and focus on what you personally do best and hire for the rest. For example, thinking that you're saving money by doing your own CPA work or cleaning the restroom are jobs that might be best left to others in order to free your time for what is important: building your successful business.

John Jordan: Excess Inventory Can Consume Your Cash

Small businesses often deploy too much cash into inventory. Business owners underestimate the amount of cash they will need to adapt their businesses. The largest consumer of cash in most businesses is excess inventory. More often than not, it is preferable to trade a little gross profit for cash reserves.

Sharon Hadary: Firms Overpay for Some People. And Underpay for Others.

Small businesses waste most money by spending too much or too little.

They spend too much money on bringing in expertise from the corporate sector in their industry. The temptation is great to bring in recognized, well-recommended experts in hopes of accelerating the business's growth. All too often, these experts' experience is primarily corporate and does not translate effectively to the entrepreneurial world.

In the same vein, entrepreneurs often invest in hiring senior executives from the corporate world, expecting that the corporate experience will transfer to the entrepreneurial world. It seldom does! After a year or so of trying, both parties realize it is not working—but the money already has been spent.

Conversely, entrepreneurs often spend too little on hiring for key positions. They believe they cannot afford to invest in experienced employees for critical areas. So they minimize salary expenses by hiring junior people with little experience. While some inexperienced employees may rise to the occasion, more often than not, by paying too little, the entrepreneur holds back the growth of the business. Finance is one of the key areas where small businesses often scrimp—hiring a bookkeeper rather than a financial analyst. Yet this is one of the most critical areas of the business. The money spent on salary and benefits for unqualified people is wasted. It is better to invest in a few highly qualified people.

Carol Ostrow: Three Ways to Stop Wasting Money

Paid advertising: The Flea Theater no longer pays for print or online ads. We do all of our advertising online and ourselves. We write our own message and use our company to disseminate.

Space and equipment: You don't need a big office, lots of computers or fancy phone systems. Your computer, your phone and if you are producing a play, a space to perform—even if it's your apartment or the empty parking lot on the corner.

Not staying on budget: Decide how much you are going to spend on a project and don't go over budget. If the set designer can't build for what you have, find another set designer. If costume changes are too many, pay the actors to use their own wardrobe. Don't ever be convinced that going over budget is containable; once you are over, it starts to spiral.


How to Cultivate an Amazing Company Culture

Want a business that stands the test of time? Take a break from balancing the books and optimizing workflows. Instead, get to work on your company's culture.

David K. Williams, author of The 7 Non-Negotiables of Winning: Tying Soft Traits to Hard Results, knows how to keep employees motivated and invested in a company's growth. As the chief executive officer of Fishbowl, a provider of inventory management and asset tracking software for small and midsized businesses (SMBs), he not only ensures the wellbeing of his company, but also that of his workforce.

His non-negotiables are respect, belief, trust, loyalty, commitment, courage and gratitude. How does emphasizing these traits help leaders establish a culture of committed and empowered employees that continually strive for success? Williams offers some examples.

4 Ways to Build a Better Workplace

1. Resolve matters face-to-face

A critical aspect in maintaining a sense of unity among your workers is "not talking behind their backs," advises Williams. "If there's an issue, take it to the person," he adds.

Don't complain to everyone but the colleague that's causing trouble for you. The hushed tones and furtive glances fool no one. And venting your frustrations to coworkers won't solve the problems that inevitably crop up in every workplace. Worse, you're feeding the rumor mill, which has a knack of poisoning relationships and bringing workplace productivity to a grinding halt.

The answer is to be direct and respectful. Sit down with your colleagues and get matters out in the open. Avoid getting personal, however. "Keep the issue the issue," says Williams.

2. Take the stigma out of failure

"We allow people to fail," says Williams in speaking of his company. Since Fishbowl employees don't have to fear for their paychecks if they take the occasional wrong turn, they are able to sustain a rapid pace of innovation, he reports.

Without that anxiety hovering above employees like a dark cloud, creativity abounds. Bold and courageous ideas take root. Failures become learning experiences instead of red marks in a worker's record.

Don't let fear of failure stand between your business and game-changing ideas.

3. Delegate smartly

Effectively delegating work involves more than just assigning tasks and meting out responsibilities. It requires letting your teams find their own paths to successful outcomes.

"Let them do it, don't micromanage," urges Williams. Cut the strings; your employees are capable professionals, not puppets. Trust in your employees' skills and problem-solving abilities. "Give them parameters and let them go," he adds.

Resist the urge to pick apart their performance and quantify their progress. "The only measurement, over the long haul," should take the form of one simple question, says Williams. "Are they doing it a little bit better?"

Try it. You'll be amazed by what your workers can achieve when they're left to their own devices.

4. Promote a good work-life balance

As much as it may pain a business owner to hear, "work is not the most important part of their employees' lives," says Williams.

Family, faith and other passions often trump career. If the job winds up taking up too much time and energy away from your employees' other priorities, you may end up with an unfulfilled workforce that will jump ship at the first opportunity.

Focus on what makes people productive members of society, not just their function within your organization. Encourage them to view work as just one component of their lives that helps them achieve their personal goals and ambitions. They'll return the favor by consistently delivering first-rate results and reward you with their loyalty.


5 Tips for Reaching Consumers When They’re Ready to Buy

Having trouble attracting customers? The problem for many small businesses is that they're not putting up enough guideposts to help potential customers along their buying journey.

And today, more of that journey is traversed online.

Todd Ebert, chief marketing officer for ReachLocal, a local online marketing specialist, has devoted countless hours of research and poured decades of hands-on experience into exploring consumer behavior and how it's evolving. Those efforts recently culminated in a new ebook titled "How Consumers Buy Today."

Ebert describes the ebook as "a labor of love for me over the past few years." The aim, he tells Small Business Computing, is to help companies, particularly small businesses, understand what the buying journey entails for consumers, and by extension, better position their business to attract them.

Here are five small business tips designed to lead consumers to your door at the moment they're ready to buy.

Change Perspective

Put yourself in the shoes of the average consumer. Sure, you may have more behind-the-scenes knowledge of the buying process, but the buying journey is roughly the same.

"Think about how you buy stuff today," says Ebert. Whether it's a home appliance, a repair service or a travel destination, most consumers today will almost instinctively run a Google search, look up videos and solicit opinions from friends over social media.

Let your own experiences be your guide. Even if you lack marketing savvy, the simple act of shifting your viewpoint will provide a solid foundation for your future marketing efforts.

Show up at the "Zero Moment of Truth"

The "Zero Moment of Truth" is a term coined by Google in an ebook fittingly called "Winning at the Zero Moment of Truth." In his own ebook, Ebert describes it as the "moment when you grab your laptop or phone and start learning about a product or service you're thinking about buying before you call or go to the store."

Needless to say, it's critical to pursue a marketing strategy that makes sure that you are present and accounted for when consumers first fire up their Web browsers or reach for that iPad or smartphone.

"If you don't engage customers before they call, then you've lost the battle," warns Ebert. That means you must establish a strong Web presence.

Buy and Build

"It's simple: brand advertising influences click-through behavior," informs Ebert. "Buy a local targeted ad," he adds.

Think online ads don't work? A marketing expert himself, Ebert was recently (and pleasantly) shocked to experience firsthand the effectiveness of online ads.

He likes to tell the story about needing a plumber to fix a broken water heater. While searching for one, an ad appeared for a local plumber whose radio commercials played constantly on Ebert's commute to work but whose name – let alone phone number -- he didn't know.

He clicked the ad. With that repair behind him, Ebert says "that all happened before I engaged anybody from that business."

"Build a website and a Facebook profile. Post interesting videos and get customer testimonials," advises Ebert. It's a take on the "build it and they will come" theme, but online, the strategy has proven itself time and time again.

Remember the Three S's

"Today, the average consumer uses more than 10 sources of information to make a purchase decision, up from just five sources in 2010," writes Ebert.

To cover these bases, remember "surfing, searching and socialize," says Ebert. Online advertisements will help snag surfers. A robust website and good SEO will help lure searchers.

"Google and Bing are taking social signals into account," reports Ebert. Social engagement not only puts your business in the running in social media circles, but it also helps it rank higher in searches.

Embrace Technology and Automation

Seek out services and products that leverage the power of analytics and automation to maximize your online marketing budget.

Ebert's own company, ReachLocal, puts technology to work via a platform that analyzes the performance of its clients' campaigns and automatically reprioritizes keyword ad spend every day. The results speak for themselves, to date "we've driven more than 100 million leads," says Ebert.

While evaluating online marketing services, look for firms that specialize in local advertising and are backed by solid and dependable data. Make sure they employ technology smartly, effectively, and that they deliver the best bang for your buck. If you encounter a marketer that exudes that "gut feeling" vibe, look elsewhere.


5 Time Wasters That Kill Your Productivity

Are you really as productive as you could be? There's only so much time in the day, and no matter how much time you put into your business it never seems like it's enough. But maybe your problem isn't that you don't have enough time—maybe it's that you're using the time you have inefficiently.

You may need more balance in your life—but you think there's no possible way you can add any "play" to your day. What you really need is to cut down on the time wasters.

It's time to get real with yourself and start getting more out of your day. No more excuses. If you're not sure where you're wasting time, a good place to start is with a time audit. This will give you good insight into whether you're spending your time effectively.

Time Is On Your Side - Yes It Is

RescueTime can help you see where you spend time on your computer. It installs a small program on your computer or mobile phone, and it tracks your activity. You can see reports on your time spent per site, per activity and per program. It rates you on the level of productivity from -2 to + 2, and it gives you an overall rating out of 100 percent. If you don't want to go the tech route, get out your pen and a pad of paper and take notes on your typical work day.

What behaviors destroy your productivity? Here are a few habits that entrepreneurs have cited as classic time-sucks.

Time Snatchers and How to Beat Them

1. You multitask

Did you have difficulty completing your time audit because you were doing too much at once? It's a common trap. Multitasking makes you feel productive, but cognitive studies show that only 2 percent of the population can multitask successfully. Try monotasking instead. Focus on one task for a set period of time and do nothing else.

Be practical. If 15 minutes of total focus is all that you can handle, just do that. Focus on one task for 15 full minutes, and then switch to something else. But stick to it for the full 15 minutes.

2. Your phone dings every 10 minutes

Does your phone ping all day with alerts? Every time your phone announces new email, FourSquare check-ins, and Facebook comments, it breaks your concentration. Be honest: those alerts aren't pressing, and most of them have nothing to do with your business.

This was my biggest time suck during the day. Between text messages, emails and app alerts, I was constantly "on." They all felt like urgent messages, and I responded to them immediately. When I did my audit, I saw how much I interrupted my day— and my nights—by responding to alerts in real time. I turned off the alerts and trained myself to respond to texts at certain times of the day.

If you're distracted by alerts, go to the settings on your phone right now and turn them off alerts for all of the apps that ping you throughout the day. Email, text messages and social media are the main offenders, but goal tracking, games and journaling apps may be to blame too.

3. You get lost in your inbox

According to a survey conducted in 2007, Microsoft workers found that they spent, on average, almost 10 minutes responding to an email after receiving an alert. It then took another 15 minutes to get back to work on their tasks. Each time they entered their inbox, they scanned through other messages, hit refresh and got "lost" in responding to other messages. Just three interruptions from email in an hour can waste that whole block of time.

You can tackle this problem with a one-two approach. First, find a tool that filters out the fluff in your email inbox. You can use to wrap up all of your newsletters into one easy-to-read digest. SaneBox automatically filters non-essential emails into folders. Once those are gone, train yourself to check email at specific times per day—8 a.m., 10 a.m. and 2 p.m. for example.

4. You visit time-wasting sites

Your time audit may reveal that you spend a lot of time checking Facebook or other time-wasting websites. You don't rely on willpower alone to break this habit—try site blocking tools. StayFocused is a Chrome browser app that lets you visit time-wasting sites, but only for a certain amount of time each day. SelfControl for Mac blocks out all offending websites and native programs for a certain time length. SelfRestraint does the same thing for Windows.

5. You allow too many unscheduled meetings

Email, Skype and text messaging all make it easier for pop-up meetings to interrupt your day. Streamline your schedule by setting specific hours for phone appointments and Skype chats.  You can use a tool like Doodle to schedule a meeting and reduce the email back-and-forth. It quickly polls participants to choose from a set of predetermined meeting times.

OK, you've faced your problem. You have solutions. Now you can bring balance back in your life, be more productive and grow your business - without losing your sanity.


Keys to Success: Overcoming 5 Fears That Hold Entrepreneurs Back

There are plenty of fears and excuses that hold us back from getting what we want as entrepreneurs. But success (and failure) is a choice.

Big concerns when first starting a business are something similar to the following:

"I'm young and I've never had a real job, why would anyone hire me without the experience?"

"I still don't have my college degree so I'm not smart enough to teach anyone this stuff."

"I'm just a washed up football jock who didn't even make it to the NFL. If I couldn't make that happen how will I make this happen?"

"I'm sleeping on my sister's couch, if my client finds that out, they will drop me for sure!"

The thing is, there will always be some conversation that will try to hold you back. It's up to you to listen to it or break through and make greatness happen no matter what.

What's holding you back? Here are the five most common fears from most entrepreneurs and tips for how to push through them and be successful:

Fear No. 1: Not believing in yourself.

Solution: Set smaller goals to accomplish faster.

The key to breaking this is building small wins each day so you can gain the confidence you need to take on a goals game in your business. Make it a game to see how many small victories each day you can have. This can be as simple as not checking email every hour, or completing one simple task each day by the deadline you create for yourself.

Fear No. 2: Thinking you need a product before you can sell it.

Solution: Drum up interest and do your research before pushing the sale.

You think you need to have the perfect product finished before you can start selling it. When you can use the bootcamp model or presell something to see how many people are willing to buy it before you spend months and months creating something that no one will buy. Yes, you can sell your product before you create it.

Fear No. 3: Needing to be absolutely perfect.

Solution: Don't stress every last, tiny detail.

"I NEED THE PERFECT LOGO!" I hear the logo design story so much it makes me want to puke. No one cares about your logo, nor the font size that's on your site.

Yes it's important to make things great and you can certainly do this by upgrading over time, but good and profitable is better than perfect and never done. Get things done. Be a person who finishes even if it's not yet perfect.

Fear No. 4: Seeking money from investors.

Solution: Network and get creative.

This is BS. I know so many entrepreneurs who started in debt, and built everything with hustle, relationships, building their audience and sweat equity. It's time to get creative and start thinking like an entrepreneur instead of thinking like someone who works in a cubicle. Jump out of your box.

Fear No. 5: You lack enough experience and knowledge to get started.

Solution: Don't limit yourself if you don't have a college education.

With everything that's available online you are telling me you can't learn what you need to? You can either find a mentor, study free resources online, or mimic successful processes.

There are so many ways to find the knowledge and get the experience you need to prove that you have the chops to be a great entrepreneur.


Life Insurance: Where to Start

Whether you are married or single, a parent or without children, life insurance can play a key role in your financial plans. However, millions of Americans have no life insurance coverage whatsoever, and of those who do, many don't have enough.

Appreciating the importance of having adequate life insurance is one step, while assessing your own unique needs is quite another.

Where to Start

Many people obtain life insurance when they first have children and then forget about it, except for when the premium bill comes due. But an effective financial plan includes reexamining your life insurance needs continually throughout your life to ensure the assets you've accumulated are protected and to provide additional opportunities to create wealth.

As a starting point, determine your net earnings after taxes as well as your routine living expenses. Other factors to include in your calculations include:

  • Any outstanding debt that you owe, such as a mortgage or education loans;
  • Future tuition bills for your children;
  • Funeral and/or potential uninsured medical costs; and
  • How much your surviving spouse might need to adequately fund a retirement nest egg.

Generally, you'll want a benefit that will cover all of these expenses. Some planning specialists believe a good rule of thumb is to buy a policy that would provide the equivalent of five to seven times your annual salary. That standardized approach may work for some people, but in reality your decision may not be that simple.

While ensuring the financial security of loved ones is a critical use of life insurance, there are other ways it can be used to meet planning goals throughout your life. For instance, people in their peak earning years can use life insurance to protect their wealth while accumulating additional tax-deferred assets. Older people can use life insurance as an integral part of an estate planning strategy designed to pass more wealth to future generations.

What Type of Policy Is Right for You

Once you have an idea of the coverage you need, evaluate whether term life or permanent life insurance is more appropriate for you. Term life is the more basic and less expensive form of life insurance -- particularly for people under age 50. A term policy provides coverage for a predetermined period of time, typically one to 10 years, but policies are also available for longer terms. Premiums increase at the end of each term and can become prohibitively expensive for older individuals. Unlike many other policies, term insurance has no cash value and benefits are paid only if you die during the policy's term.

Permanent life insurance combines death benefit protection with a tax-deferred savings component. With permanent life insurance, as long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate for the life of the contract. Part of that premium accrues as a tax-deferred cash value. As the policy's value increases, you may be able to borrow up to 90% tax-free at attractive interest rates. If you do not repay the borrowed money, it will be taxable as income at then-current rates. And if you're younger than age 59 1/2, you may also be subject to an additional 10% IRS early withdrawal penalty.

Determining the right type and amount of life insurance coverage you need is easier said than done. Your financial professional can help you make an accurate assessment of your needs.

The cost and availability of life insurance depends on such factors as age, current health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insured by having the policy approved. There are also expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges.

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