The Prepared Business Owner: He Sleeps in a Storm

Posted on February 1, 2010 by Eliot Wagonheim

In Have a Little Faith, Mitch Albom quotes a sermon so important to business owners that I have reprinted the entire excerpt below:

A man seeks employment on a farm.  He hands his letter of recommendation to his new employer.  It reads simply, 'He sleeps in a storm.'

Several weeks pass and suddenly, in the middle of the night, a powerful storm rips through the valley. 

Awakened by the swirlining rain and howling wind, the owner leaps out of bed.  He calls for his new hired hand, but the man is sleeping soundly. 

So he dashes off to the barn.  He sees, to his amazement, that the animals are secure with plenty of feed.

He runs out to the field.  He sees the bales of wheat have been bound and are wrapped in tarpaulins.

He races to the silo.  The doors are latched, and the grain is dry. 

And then he understands.  'He sleeps in a storm.'

Running your own business is an exercise in piloting to safe harbors through strong and unexpected storms.  And as business owners, the storms rage all around us. The bankruptcy of a major customer is a storm.  So too, the loss of a major salesperson, along with the customers who elected to follow her.  A job gone south, the loss of key support personnel, and one's own unexpected absence from work -- all are gales of sudden and untold destructive force. 

To many, the state of our economy this past 18 months has been a storm of epic proportions. 

The question then becomes:  "Can you sleep in a storm?"

Have you:

  • Secured lines of credit with terms and limit appropriate to your business?
  • Protected your streams of revenue by locking down key salespeople with restrictive covenants? 
  • Limited your risk by negotiating manageable damages and indemnification provisions -- particularly in those contracts governing your largest projects?
  • Trained your replacement?
  • Documented key procedures so that a new person could step into a job knowing key passwords, resources, and procedures?

Too often, these types of preparations are like flowers at a funeral -- they arrive all at once, and too late.  Prudent business owners prepare.  They schedule regular meetings with their management team and key advisors, whether quarterly, every 6 months, or even annually, to consider and prepare for what storms may come. 

And when those storms arrive, as they most certainly will, the prudent business owner sleeps soundly.

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Uncle Joe doesn't have all the answers

Posted on January 20, 2010 by Eliot Wagonheim

It’s not hard to find a relative or friend willing to offer a personal opinion on a professional problem. There is really no cheaper advice than that coming from your neighbor. But with the discounted price, one risks listening to uninformed advice from a possibly sophomoric source.

Every month, I consult with business owners who have received wrong, incomplete and sometimes catastrophic advice from friends or relatives who happen to be professionals, albeit with the wrong kind of experience. Often, such advice is simply unfit for the specific business or situation at hand. Advice that is irrelevant to you and your business, although well intended, is more harmful to you than harmless. 

For example, let’s say that you had a good fiscal year and need some additional accounting assistance. Your Uncle Joe has volunteered his services since he used to own his own small business and had to file tax forms for years. What your retired Uncle doesn’t know is that tax laws have changed drastically since he was last in business 20 years ago and filing these principle forms wrongly would result in damaging consequences. 

One of the great truths I have learned in my 20 years of experience counseling businesses is that paying for quality advice is never a mistake. Professional consultants are experts in their fields and have built their businesses and reputations on giving solid, experienced guidance in their areas of expertise. The time and expense it can potentially cost to correct any problems caused by misguided advice is an unnecessary one. Consulting with the right person from the beginning will save you time and money.

When you are sick, don’t you go to a doctor? When you have a toothache, don’t you go to a dentist? Reputable specialists are so for a reason. If you have a legal matter, consult a respectable attorney as you would consult a brain surgeon, if needed be. Your business is important and the counsel you seek to nurture it should reflect that worth. Consult with the right people: professionals with experience directly relating to your business.

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The Handshake vs. the Written Contract

Posted on January 5, 2010 by Kimberly J. Hankins

 

I may be a bit younger in years, but I can still recall when a “handshake and a promise” deal actually meant something. Perhaps some of my confidence in another’s word stems from my small-town Mississippi roots. Nonetheless, in today’s economy, your business will need a lot more than a handshake if you want to get paid. Luckily, only a few hours spent with a reputable attorney can present you with a sound contract based on solid terms and conditions, which will save you time, stress and money, should a client try and stiff you on down the line.

 

Without a mutually agreed upon legal contract in place, any terms agreed upon with a handshake are moot. Entering into a handshake agreement could put a business at risk for losing money not only in the original agreement but also in court fees for legal action against a deceitful client (unjust enrichment, quantum meruit, and the like).

 

Since we’re not in 1950’s southern Mississippi, and few millennials even know the meaning of such hospitality in business transactions, a good rule of thumb for any business is to ditch the handshake and ask for a signature acknowledging an ironclad contract, complete with terms and conditions. Those terms and conditions should include the most basic items such as:

  • Compensation and payment terms
  • Changes/ additional services
  • Emergency services
  • Reimbursable expenses
  • Provisions of default
  • Dispute resolution
  • Governing law

 

Legal considerations, as stated above, are extremely important to help ensure appropriate compensation for hard work. Some businesses believe that something in writing, though not in legal contract form, is just as dependable. The reality of the situation is a lack of clearly stated legal terms and conditions could leave a business with a higher level of risk for a transaction.

 

While developing long-standing relationships with clients is important, don’t forget to protect yourself and your business in the process. Shake your client’s hand and exchange the promise to fulfill the contract, but also take a couple of hours with your attorney to put a “gentleman’s agreement” into writing. For the most part, your company’s terms and conditions can and should be standard with every contract, so this will not be an ongoing legal expense. Rather, it will ensure you peace of mind in knowing that should an agreement not go as planned, you have a contract to protect your business. 

 

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Marketing Momentum in the New Year

Posted on December 21, 2009 by Eliot Wagonheim

 

We all know the resolution drill. The new year marks the welcome of new beginnings and a commitment to resolutions focused toward adopting healthier lifestyles. Come the new year, gyms and fitness clubs across the country will be filled with people sweating off the holiday pounds.  Yet, by spring many of those same people are on the way to the office without a workout in sight. With one bite of a calorie-filled blueberry muffin, the resolution once made with dedication is no longer a priority.

 

Marketing your business can easily be compared to this all-too-common scenario. As soon as a new product is rolled out or new service offered, a business quickly plans a strategy to get the word out to consumers to increase sales and visibility to target audiences. Spending merely a few weeks working to get your business or product noticed, building your brand, and expanding your network will most likely not offer you the same results as making a constant, consistent effort.  

 

Think about the results you get from exercising. A few weeks of dedication at the gym may result in a pair of pants one size smaller, but months later they aren’t going to fit if you haven’t maintained a consistent workout regimen.   The same can be said for your business. You may feel good when business is busy and profits are up, but you must put yourself and your business at the forefront and keep marketing to consumers to stay visible.  It takes commitment.  It takes a plan.
 

An easy way to commit to marketing your business year-round is by creating a marketing plan. If this is your businesses’ first attempt, consider consulting a professional or start small by creating a short-term marketing plan with smaller, attainable goals that can be reached in shorter time.  Near the end of the short-term marketing plan, evaluate your goals and consider expanding to a long-term marketing plan with annual goals.
 

As daunting and time-consuming as a marketing plan may seem, the following are a few simple activities that can be done every week to help increase your brand awareness in the community: 

  • Attend industry networking events
  • Volunteer to lecture or speak at appropriate professional associations or community organization meetings
  • Write editorial pieces based on recent news affecting your industry for your local newspaper
  • Sponsor local events or charities

 

While a plethora of practices can be considered for use, the invariable ingredient to a successful marketing formula is consistency and rhythm.  Allotting the time for habitual marketing will help to steadily build a company’s brand visibility. Additionally, the regularity in practices will help to avoid making resolutions to get a business back in shape. Let’s face it…resolutions are tricky to keep, especially if they involve going to a gym, but if it’s better marketing you want, take the time and make the commitment to a solid marketing plan and adopt a proactive mentality. It could be as simple as turning on your computer once a week and researching opportunities online, blueberry muffin in hand.

 

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The Business Lessons of Chanukah

Posted on December 17, 2009 by Eliot Wagonheim

 

Last week, I found myself reading up on Chanukah -- the Jewish Festival of Lights -- as my family and I prepared for the holiday.  As I looked for a new way to talk about the meaning of the holiday with my children, I began to realize the business lessons to be drawn from the symbolism used in the celebration.

Each night, a new candle is lit on the menorah.  On the first night, only the shamas (literally "servant") or highest candle is lit, along with one other, symbolizing the first night.  On the second night, the shamas is used to light two candles, and so on.  

It is written that the celebration is really about overcoming darkness, whether it be physical or spiritual.  A parallel can be drawn to business condition.  Particularly in these economic times, every business -- successful or not -- must fight to overcome inertia, old/bad practices, routine, or complacency.  Every business leader has to work each day to embrace and master new challenges, sometimes radically altering the way his or her company had done business for years before.

Overcoming the weight...and yes darkness...that constitutes resistance to change is a very real and daunting challenge.   The first light on the menorah, therefore, symbolizes how one candle, representing even the smallest positive change, is enough to overcome a world of night and darkness.

The lighting of the second candle shows how the light represented by that one small prior act now spreads.  This is a reminder that a single act -- a single positive change -- while not sufficient to accomplish a significant goal, can lay the foundation for more change.  The second light shows that we must redouble our efforts, even after the success of the last initiative.  

The lesson of the third light is consistency.  As the saying goes: "We did it once because we were inspired and a second time because we were encouraged by the first. This third time, we push back at the darkness because we are committed."  It is this third effort that expresses persistence and commitment to dispel darkness with light.

Upon reaching the fourth light on the menorah, we would find that we are halfway to fulfillment of our purpose.  This is point at which many worthwhile efforts find themselves sidetracked by distractions.  It is here that a leader must help the organization maintain focus by constantly asking the question:  "Does this help me achieve my goal?"

On the fifth night, we have achieved a majority.  The balance has been shifted from the old (darkness) to the new (light).  This is the most dangerous point in any process -- when the goal is in sight and people can become complascent, knowing that the path is now downhill.  Should the team spend too much time reveling in its accomplishments, it will ultimately fall short of its goal.  So it is here that the leader must demonstrate the importance of bringing light (change) to even the most remote corners of the company.  It is not enough to achieve a majority -- the goal must be completely fulfilled.

It is the sixth and seventh nights that are the richest in symbolism.  The Judeo-Christian heritage teaches that the world was created in six days.  By reaching the symbolic sixth night of any initiative, the leader has maintained a path long enough to bring about monumental change.  This is the time to check benchmarks.

Traditionally, the seventh day is a time of reflection.  Consequently, even though we may be in view of the goal, we have not quite reached it.  Near (but not at) the endpoint is a time to take stock.   Enough has been accomplished for us to review progress and make course adjustments to continue on. 

Finally, we reach the eighth night -- the time at which we have accomplished our goal of bringing about significant change.  Over the years, I have learned that nearly every culture has a holiday or festival that revolves around lights, whether electric (Christmas), candles (Chanukah, Kwanzaa and the season of Advent) or even lanterns in certain Asian traditions.  These festivals almost always seem to take place at the darkest time of year and serve to remind us of hope and of our own ability to spread light where there is none.

In the tradition of Chanukah, the use of the menorah through the eight nights of the festival, the teaching is that miracles can happen even though the road is long and arduous. 

In the management of any business, it strikes me that the teaching is the same. 

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Vision: Figuring Out Who You Are and What You Want to Be

Posted on December 8, 2009 by Eliot Wagonheim

Not long ago, Duke University Men's Basketball Head Coach Mike Krzyzewski and the Duke athletic department developed a list of nine principles that defined Duke athletics.  Coach K described these principles as "the things that are essential to who we are." 

The nine principles were revealed to a gathered crowd of 850 student-atheletes, coaches and administrators in Cameron Indoor Stadium by former Duke student-athletes who represent great success stories in their respective fields.  The words selected by Duke to define Duke were: (1) education; (2) respect; (3) integrity; (4) diversity; (5) sportsmanship; (6) commitment; (7) loyalty; (8) accountability; and (9) excellence.

As I read Coach K's description of Duke's guiding principles, I could not help but focus upon the applicability of the same methodology and mindset to my own small business and those I am fortunate enough to counsel.  I wondered whether one could gather a roomful of often cynical employees around a conference table, discuss values, and have it actually mean something tangible. 

In other words, I wondered "what were the keys to a successful company vision?"

Tony Gattari, an Australian corporate consultant wrote in Good Ezines that successful corporate visions share three attributes:

  1. It's infectious.  Just like a disease, a vision is at its most contagious when it is alive and active in the host.
     
  2. It  comes from within.  Rather than having management swoop in and tack a poster in the lunchroom or spend $1,000 at Successories, the vision is tied to the employees and created from the real passions and desires of the company's leadership.
     
  3. It goes beyond the company's 4 walls.  A company with a successful corporate vision extends that vision to vendors, colleagues, customers, and the business community at large -- not in an evangelical way, but rather simply by the way the company interacts with the outside world. 

In the privacy of their own homes and hearts, people often find themselves doing some soul-searching in December in contemplation of resolutions for the coming year.  Perhaps, and maybe even especially, in these economic times, December may be a good time for some corporate soul searching as well. 

 

 

 

 

 

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Where Company Policy is Concerned: The Devil is in the Details

Posted on November 23, 2009 by Kimberly J. Hankins

 

Yesterday, we received the catalog from Despair.com. One of their demotivators featured the legend: “Hard work often pays off after time, but laziness always pays off now.” I thought about this as I was working with a client on revamping her company’s employee handbook. We discussed everything from dress code to paid-time-off, to the point where she was so tired that she asked, “Do you think that all of these details really matter? Can’t we be a little more vague and worry about addressing some of these issues when they come up?” 

But the point is, you can't -- not if you want to avoid unwanted results from your employees or claims from DLLR.  As time-consuming as the redrafting effort was, we needed to get it right.  The devil is in the details.

 

It’s easy for this idea of the devil being in the details to be lost on some. In this economy, we are tempted to rush, rush, rush to get the end product completed. We’re stretched thin, and our only goal tends to be the almighty dollar. However, we have got to stop and be reminded that, in any endeavor, the devil – the difficult part – is getting those small details just right, so that the end result is excellence. 

 

When we neglect the details, people notice. For instance, in that employee handbook, if we failed to note that jeans were impermissible for office staff, you can bet that employees would notice and would expect that jeans were acceptable attire. What’s worse, the client who walks through the door to your business and sees the office staff wearing the jeans may be turned off by the lack of professionalism. And if you later tried to enforce a “no jeans” policy, or ultimately let an employee go as a result of the lack of professionalism, not having this detail documented in the handbook may allow that employee a legitimate claim for wrongful discharge and/or continued benefits.

Of course, the flip side is also true. Sometimes the more details you tend to, the less that people really notice. But this is a good thing. Allow me to explain:

 

You come home from work today, check your mail, and find an invitation to a party in a few weeks. The date comes along, and you go to said party, where you eat, drink, mix and mingle for a few hours, and then head home. Do you really think about all of the details that went into the party?

If I were your hostess, here’s what would have gone into that party (at a bare minimum!): 

 

  • 2 hour to select the perfect theme (season, occasion, etc.), date (no Ravens home game, or other obvious conflict), time and location (backyard, fancy restaurant, art gallery, you name it!)
  • 30 minutes forming a guest list (taking care to stay within proper friend and family circles and to be as inclusive as possible),
  • 2-3 hours to select the perfect invitation (considering everything from the theme to the font, because the invitation sets the tone of the event),
  • 30 minutes choosing stamps and timely mailing the invitations (there is such a great selection of stamps out there, you may as well find one that works well with your event!),
  • 2 hours selecting decorations (even more if some decorations are homemade or require any kind of legwork)
  • 3 hours selecting a menu
  • 2 hours shopping for decorations and food (if you aren’t using a caterer)
  • 4 hours preparing food (again, if you aren’t using a caterer)
  • 5 hours cleaning and/or setting up the space (placecards or nametags… labels to identify food selections… fresh flowers on tables and in the powder room…)
  • 2 hours assembling my own wardrobe for the event

And then, the guests arrive.

 

Paying attention to all of these details is exactly why the party will go off flawlessly. And exactly why not one guest will think twice about everything that went into making the party fabulous. But guess what? It’s exactly why every guest will remember the evening.

Both personally and professionally – whatever your business, give great care to those details! 

 

  • Tuck in your shirt. Look the part.   
  • Proofread. Yes, even emails.
  • Avoid saying “um.”
  • Remember people’s names.
  • Make eye contact. Smile!
  • Create an outline before your next presentation. Practice.
  • Ditch the AOL, Yahoo, or Gmail account and get your business its own domain name! For $75, two guys in a pickup are transformed into a solid company you can trust.

If you take the time to battle those devilish details, they are sure to produce returns tenfold.

I wore maroon, patent leather, pointed-toe, crocodile-printed pumps to work today. They pick up the hint of burgundy in my brown checked suit and truly complete the outfit. They even make me feel more confident as I attend my morning, lunch, and dinner meetings today. 

 

As I said…the devil is in the details.

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Fall (Corporate) Housekeeping

Posted on October 5, 2009 by Michael J. Lentz

In an unfortunate rite of fall, Maryland law requires the State Comptroller “immediately after September 30 of each year,” to prepare, and send to the State Department of Assessments and Taxation (“SDAT”), a list of every Maryland corporation that has not paid any tax due (other than a purely local tax) by October 1 of the year following the year in which the tax was due. The requirement also applies to Maryland Limited Liability Companies (LLCs), and includes a failure to make any required unemployment insurance contributions or reimbursement.

When SDAT receives the list from the Comptroller, it sends each entity on the list a notice that the entity’s charter will be forfeited if the taxes due are not paid by the date stated in the notice. Unfortunately, mailing of the notice is sufficient – failure to receive the notice does not affect or delay the forfeiture or annulment of corporate existence. 

 

Most companies, though, find another aspect of the forfeiture law even more troubling, as it is a trap for the unwary business owner. Maryland entities, as well as those formed outside of Maryland but subject to jurisdiction in Maryland (which likely means doing business in Maryland) must file an annual report, and pay the annual report fee.  Because the form, found here, is called a personal property tax return, many business owners understandably believe that they need not file the form unless the business owns property in Maryland. 

 

Unfortunately, this is not so. The filing requirement (and $300 annual fee) apply to domestic and foreign corporations, limited liability companies (LLCs), limited liability partnerships (LLPs) limited partnerships (LPs, Business Trusts, and Real Estate Investment Trusts (REITs), whether or not they own personal property in Maryland. Immediately after September 30 of each year, the Comptroller certifies to the SDAT a list of entities that have not filed their personal property returns. The SDAT then issues a “proclamation” forfeiting the charters of all non-compliant entities. When a forfeiture occurs, the SDAT will mail notice of forfeiture to the affected entity, at the entity’s address on record with the SDAT.

 

There are two significant consequences to forfeiture: first, any person who knowingly transacts business in the name of a corporation whose charter has been forfeited and not revived is guilty of a misdemeanor “and on conviction is subject to a fine of not more than $500.” Second, once a corporation’s charter is forfeit, the corporation in its own name can no longer maintain or defend any suit in any Maryland court. Rather, the directors of the corporation become trustees for the assets of the corporation. 

 

Revival of a forfeited charter is a fairly simple matter. First, the forfeited corporation must correct the problem that led to the forfeiture. Once this is done, the corporation should file Articles of Revival (form and instructions here). For an LLC, LLP, or LP, file Articles of Reinstatement (form and instructions here).    

 

As a matter of careful housekeeping, the forfeited entity should, after revival, adopt resolutions expressly ratifying all actions taken during the period for which it was without a charter. 

 

Bottom Line:  Make sure that your business has paid all necessary taxes and has filed a Personal Property Return for 2009, even if the business does not own any property. If you are unsure, you can check the SDAT website listing entities subject to forfeiture.   You can also check whether your company entity is in good standing via the SDAT’s Charter Search Page.  If your entity has been forfeited, revive it promptly; this will avoid many headaches later. 

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Inventory Control Means Value at the Time of the Sale

Posted on September 10, 2009 by Eliot Wagonheim

The Letter of Intent ("LOI") set the price at $22,000,000.  The Asset Purchase Agreement, known as the "APA", executed just six weeks later set the price at $21,750,000.  At closing, the purchaser wound up paying $20,200,000.  The sole reason for this 10%, two million dollar haircut was the seller's lack of inventory control. 

Particularly in a tight economy, due diligence is the order of the day.  Savvy purchasers will look for audited financials and recently documented full, physical inventories before coming to the settlement table.  In that same vein, savvy sellers will address this issue well before even putting their company on the block.  The price of overlooking inventory controls is steep. 

If the Buyer ever gets to the point of knowing more about the company than the Seller, the Seller will take a hit.

Too many companies, particularly family owned companies, try to sell the business while relying on the strategies and procedures which served them well over the years while building the company.  They don't work.  A successful sale depends upon the seller's ability to view the company through the eyes of the buyer.  Most notably, this includes absolute verification of inventory.  

So, before seeing their lawyer, business broker or investment banker, sellers hoping to realize full value at closing, would be best advised to take a stroll back to the warehouse...and stay there for a while.

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What Message are Your Employees Really Sending?

Posted on September 7, 2009 by Eliot Wagonheim

Yesterday, I found myself at a traffic light behind a company truck.  The truck belonged to and advertised a dog waste removal company.  I pondered this.  For a while, I wondered what the job interview was like.  But as the light turned green and traffic started to move, I noticed something else.  The truck was sporting a bumper sticker that read:

Your Life is not My  Problem.

I turned my pondering up a notch.  "How is it," I wondered "that in this one moment, frozen in time, the dog poop guy seems to be looking down on my life?"  Now, don't get me wrong.  This guy, perhaps even the owner, had a company, did honest work, and maybe even made a killing performing a service hordes of people would pay to avoid having to do.  But why was his employee insulting me.  And did the company's owner know it?

And this led me to my question:

How many owners realize the hidden (and not-so-hidden) messages their employees are sending?

Several years ago, Walgreens faced a lawsuit over just this issue -- only in more extreme form.  It seems that Walgreens pharmacy employees entered their thoughts on various customers in the comments field of the company's perscription software.  There, stapled right to a perscription for a customer's anti-anxiety medication, was a print out featuring some anonymous employee's assessment "She's CRAZY." 

Now maybe she is, and maybe she isn't.  But one thing we know for sure.  Walgreens has spent millions of dollars on a campaign to convince the public that it is a friendly neighborhood pharmacy.  How much money, then, did this one errant employee flush down the drain with one careless, or in this case, incredibly stupid example of personal expression?

Appearances matter.  If your employees have customer contact, check every aspect of the interaction.

  • What do the outgoing voice mail messages say?
  • Look for bumper stickers on vehicles used for delivery -- political, religious, or even humorous.  What's funny to one is insulting to another.
  • Listen to how your employees express themselves.  Do they have a penchant for telling ethnic jokes or making sexist comments in an attempt to be funny?  Some people do  these things so often they don't even notice them anymore.

Can you see your company through your prospective customer's eyes?  If the dog waste company could, they might have taken the time to ponder that bumper sticker.

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