Dr Jeff Cornwall

I wrote in a post yesterday about the growing trend found in the latest NFIB survey of small business owners increasing prices in the face of increasing inflation in the economy.

A common question I get asked is just how to go about raising prices, especially given the weak demand as the recession lingers.

Barbara Findlay Schenck offers some very specific tips in an article at Business on Main, which are well worth a read.  Whatever steps you take to increase pricing, Findlay offers this advice:

As you announce new prices, understand and be prepared to define the
reason behind increases — but don’t apologize. Keep your focus on the
high value you’re delivering, the unique quality you provide and the
options available to ease your customers’ purchase decisions.

Remember that customer service is the competitive advantage that most small businesses have over their larger competitors.  Never lose sight of the importance of this as you move toward increasing prices to offset inflation.

I will be writing a post on this topic early next week.

(My blog is a part of an online influencer network for Business on Main. I receive incentives to share my views on a monthly basis.)

One of the tools I use to teach is story telling.  It is not the kind of war stories that have become infamous among some of us who used to “do” and now “teach.”

Rather, when I am trying to bring some concept or lesson to life for my students I tend to either use experiential exercises or stories from my own or other entrepreneurs’ experiences.  I find that both approaches can be effective ways to make key points memorable.

One of my students’ favorite stories is one I tell about a time that I was very discouraged and down in the dumps.  I was tired of always being the person to keep everyone else “up.”  I decided that I deserved a good old-fashioned pout.  We were going throw a particularly rough patch in our growth and were once again feeling the stresses and strains of managing a high growth venture that was too often short on cash.

So when I got to work that morning I trudged across the parking lot.  When I got off the elevator on the fifth floor where our offices were, I grunted something inaudible to the receptionist.  I then proceeded to walk right through the various office spaces between the front door and my office — accounts payable, billing, marketing, and HR — without doing anything but hang my head low, ignoring everyone along the way.  Finally, I plopped myself in my chair ready to spend the morning feeling sorry for myself.

Right about then one of our longest term employees burst into my office.

“Don’t you ever walk in here again like that,” she stated sternly.  “We all know how tough things are right now.  The only thing that keeps us going, keeps us hopeful for the future, is watching you come in everyday with a smile and look of complete confidence.  If you give up, we will all give up.”

She was right.  I made sure to never show my fear or worries again.  Entrepreneurs need to be the emotional spark plugs for their team.

An article by Jeff Wuorio from Business on Main reinforces the importance of this role for the entrepreneur.

But a small-business owner’s enthusiasm for his
entrepreneurial goal isn’t just a source of drive and energy. It also sets an
example for partners and employees, building a sense of shared effort toward
something of bona fide value. And this feeling can be utterly contagious.

“When employees see happy employers, the vibe carries over,”
says Renee Chronister, owner of Parameter Security, a St. Louis online security
firm. “The best way to kill morale is to be unhappy. Remember, you set the
example and standard in the organization that others follow.”

The author also explains how it cannot be only the entrepreneur’s job to create a happy climate.  We should strive to build a happy culture, which all begins with the people we hire.  He offers some great tips on hiring for a happy and positive workforce.

(My blog is a part of an online influencer network for Business on Main. I receive incentives to share my views on a monthly basis.) 

In two previous columns, we began looking at the “three-legged-stool” — that is, whom small businesses need as supporting advisers. The first two legs were a business-minded attorney and a CPA.

The final leg of the stool is a business banker.

Because bankers are generally not able to lend money until businesses are well established, many entrepreneurs seem to be in no hurry to establish a relationship with a specific business banker.

However, Allan Joiner, senior vice president, relationship manager commercial and industrial banking with Avenue Bank, identifies two main reasons to connect with a banker early in your venture.

“First, your banker is your advocate,” Joiner said. “Having an advocate within the bank can not only demystify some of the finance world for you but will be your champion inside the bank for future requests.

“Second, a good banker will become a trusted financial adviser. Because bankers are exposed to multiple business and industries, they can be a great sounding board for ideas and help strategize on ways to reach financial objectives.”

With all the Web-based resources out there, including completely online banks, a personal relationship with a business banker may seem less important.

“Developing a personal relationship with a banker can make all the difference when you have an urgent need or run into difficulty,” Joiner said. “There is no substitute for the service a dedicated banker can provide who has a vested interest in you and your business.”

Successfully working with a banker requires a proactive, intentional plan. There are specific steps that entrepreneurs should follow to build a strong long-term relationship with their bank.

“Developing any relationship takes mutual effort and understanding,” Joiner said. “For starters, it is just as important for entrepreneurs to interview the prospective bank to make sure the fit is right as it is for the bank to evaluate the entrepreneur.

“From there, strong banking relationships are built over time through regular two-way communication and performing within mutually agreed-upon expectations. While developing a good relationship with a banker cannot prevent occasional difficulties or (ensure) that the answer to every request will be yes, a constructive relationship with the bank is infinitely more beneficial than an adversarial one for both parties.”

One of the most common mistakes made by entrepreneurs is not understanding how bankers think — and specifically how they make decisions on business loans.

“Banks are not in business to take equity risk,” Joiner said. “Banking is a low-risk industry. Because we fund loans largely with depositors’ dollars, banks are not in a position to extend credit without a minimum of two readily identifiable repayment sources.

“Most startup businesses will not be eligible for traditional bank financing because there is no history of cash flow and often little, if any, residual collateral to retire the debt if the business fails.”

There are many other advisers who can be essential for the success of entrepreneurs. But, as my father always stressed, the foundation of any successful business is usually built on a strong relationship with your attorney, CPA and banker.

A recent study from The Guardian Life Small Business Research Institute looks at something near and dear to my heart — Millennial Generation small business
owners as compared to other generations. 

Here are my thoughts on a few of their key findings:

• Millennials
  are 50% more likely to expand their business compared to prior generations.  This one does not surprise me.  More and more of today’s young entrepreneurs have studied entrepreneurship.  There are also many more resources out there for them to draw upon.  Part of what drives the interest in expansion is confidence.  Understanding what drives successful growth makes seem more attainable.  Many of our students talk about how to scale their ventures — it seems to be part of their basic outlook on starting ventures.
• Millennials reported they are 100% more likely to sell
  their business.  Again, not at all surprising.  Exit planning is fundamental to what they learn about entrepreneurship and what they most often hear about it in media where to buy topamax online stories.  It also fits with their limited attention span — their words, not mine.  Almost all of my students admit that they probably will lose interest in a business within a few years.  They seem to be born to be serial entrepreneurs. 
• Millennials are 120% more likely to be a business owner without other workplace
  experience.  The old common wisdom was that you need to go out and work for someone for years before you strike out on your own.  Not any more.  We encourage our students to start ventures while in school to use as learning vehicles.  Every year we see more and more young graduates walk across the stage with their diploma and a business in hand.
• Only
  8% of Millennials inherited their business from their parents.  No kidding.  The Baby Boomers have not saved enough to retire, so they will be needing those businesses for a long, long time!!

I have invited Bobby Guy, a local attorney here in Nashville, to speak in my classes from time to time. While it may not seem that unusual or blog-worthy to mention that I have a lawyer in my class, it is his area of law that makes his visit unusual. For you see, Mr. Guy practices bankruptcy law. How often do entrepreneurs get to hear from a person who understands business failure from the inside before they start their ventures?

Bobby has now taken what he has learned from years of practicing bankruptcy law and turned it into a book titled Distress to Success. (You can see a preview of the book at Amazon).

Bobby Guy is one of the few attorneys I have met who truly understand that financial distress in business is not an event, but a process that unfolds over time due to an array of specific decisions.  Taking this perspective offers both businesses and their investors the opportunity to develop a sound strategy early enough in this process to actually help many of these businesses avoid bankruptcy.  This is truly a groundbreaking book that can help transform how all of us work with distressed businesses.

The book has several audiences.

It is written for the business leader struggling to return a company from the “red” into the “black.”  For the struggling company, Distress to Success is a roadmap to early intervention when good options are still available. It presents business executives with a new paradigm for thinking about financial distress, takes them on a crash course through what to expect, and then arms them with strategies for achieving a confident recovery.
  
For the distressed investor, Distress to Success outlines the complex strategies that arise in the ever-evolving landscape of insolvency, and provides buyers with tactics for achieving success in the pursuit of exciting undervalued opportunities.

Even in these difficult times success can be created out of impending failure.

One of the first bits of wisdom my father shared with me many years ago was that a small business needed “a strong three-legged stool” to support it. The three legs should consist of a strong attorney, a CPA and a business banker.

To save money, many startup entrepreneurs cut corners on legal work. With all the use of do-it-yourself legal websites, many entrepreneurs seem to be questioning whether they need a personal relationship with an attorney.

“Every business is different, and that is equally true for their legal needs,” said Chris Sloan, an attorney with the Nashville office of Baker, Donelson, Bearman, Caldwell & Berkowitz. “For the truly simple, small, mom-and- pop types of businesses, you may be OK with a do-it-yourself approach. But if you are expecting a lot of growth, or have partners, an off-the-shelf approach is often a poor fit.”

I tell entrepreneurs that when it comes to partnership/shareholder agreements, you can pay your attorney now or pay him a lot more later.

“There’s a reason why we call partnership disputes ‘business divorces,’ ” Sloan said. “They can be just about as nasty and emotional at times.

“The best way to avoid that is with an agreement that addresses issues like decision-making, dispute resolution, what happens if someone dies or wants to leave, and how and when to shut or sell the business.

“With a good agreement, you accomplish two things. First, you avoid a dispute down the road, and second, you have a chance to preserve the personal relationships.”
Shape the issues

“First, find a business lawyer,” Sloan said. “Many lawyers cannot think outside of the law school approach of spotting every issue and addressing it. Those are not business lawyers.

“A good lawyer also has the heart of a teacher; they should be able to explain things in a way that the client can understand them and feels comfortable. How they do this also gives you a good indication of how they will write, how they will negotiate and how they will interact with another party.

“Lastly, remember that lawyers are like doctors; there are many different areas of expertise. Just like you wouldn’t go to an internist for open heart surgery, you shouldn’t go to a public securities lawyer or a litigator for startup work.”

One attorney with whom I worked in my business past used to say that he wanted me to first shape the issues we were working on for him from a business perspective, and then he’d do the lawyering.

Sloan agreed with this advice.

“My job isn’t to say, ‘Do this. Don’t do that.’ It’s for you to tell me your business objective, and for me to advise you on the different ways to accomplish it and the risks associated with each one.”

A strong legal foundation is one of the three legs of the stool supporting a small business. My subsequent columns will examine the other two legs of the stool.

I was a guest on Barbara Weltman’s Build Your Business Radio Show and offered some more thoughts on inflation and the economy facing small business owners: Radio Interview