Topic for Discussion: How does a small business owner think big?

Answer: Any sales person will tell you that it can take as much effort to close a small sale as it does to close a big one. The length of the suspect-prospect-customer pipeline does not vary by size of order. You have to identify the potential customer (suspect), make contact (prospect) and make the sale (customer). As business owners we should identify suspects among the largest companies and governments who would benefit from our service. Why? First, larger companies have bigger needs which translate to bigger orders. Large companies often are more stable and more likely to continue in business, meaning recurring orders. Also, many large companies actively look for ways to buy more products and services from small businesses in their communities. Often, their biggest problem is finding you!

Community involvement is a great way to meet people from large organizations. Get involved with your local Chamber of Commerce and your city’s office of economic development. Small Business Development Corporations, available, throughout the country, are another great conduit to large companies. Watch the local newspaper for procurement fairs, where large companies set up booths to meet with small suppliers. Join trade organizations and attend national conferences. Trade organizations exert a lot of effort in increasing members’ revenue and much of that effort is targeted at larger organizations.

You think about it. Are you selling your product or service to large companies and governments?

Key Idea #2: Be Willing to Start Small to Prove Yourself. Shiv and Meena didn’t start INDUS with fancy offices. Shiv needed a telephone, a computer and a printer, all of which he kept in his apartment, to deliver his first product to his first customer. He had no office and he had no employees.

Topic for Discussion: If you have a good idea for a business, and you want to give it a try, what do you really need?

Answer: First, you need to be able to communicate with customers and potential customers. That means you need a cell phone and e-mail. You probably already have both. Then, you need the raw materials, the capital assets and the inventory you have to have to deliver the product or service you will sell. Depending on the lead time to acquire these, you may very well be able to delay the purchase until you have your first purchase order from a customer. Finally, you need the labor. In Shiv’s case, he provided the labor for the first few jobs. He didn’t need employees to do the work nor to support the organization. If you can’t do the work yourself, perhaps you can attract some qualified individuals on a contract basis to assist you. You can be looking for those individuals at the same time you are hunting for that first customer.

You think about it. Do you have a good idea for starting your own business? How much money do you really need to obtain and deliver that first sale? What are you waiting for?

Key Idea #3: Take Advantage of Leadership Opportunities. Imagine how Shiv felt when he came to the realization, “I can do this.” What an inspiring (and frightening!) moment that must have been! Service companies sell what they know as much as they sell what they do. Shiv saw the opportunity to couple his engineering and technology skills to solve problems others had left unsolved.

Topic for Discussion: Once we recognize the opportunity to do something really special, as Shiv and his INDUS team have done, how do we take advantage of it?

Answer: Shiv had some great advice for business owners and we would all be wise to remember his words. Focus. Focus. Focus. That’s what he said. Know your key competencies and your key customers. Focus on those. Don’t try to be all things to all customers. Concentrate on what you can deliver well to a customer who finds what you deliver solves a business problem of his. It seems so simple, doesn’t it? Yet, so many of us take the shotgun approach to selling. Instead of delivering only what we do well to someone who needs it, we have a tendency to chase revenue dollars. It’s hard to turn a sale down and if we have to opportunity to make that sale, then we go for it.

Shiv says that if we stay focused, the money will take care of itself. We have heard this same sentiment, over and over again, from many successful entrepreneurs we have showcased here at Small Business School. Shiv knew he could successfully start his own business when he saw the match between his engineering and technology skills with the needs of his customers. When we see that match, we, too, need to capitalize on the opportunity, and not permit ourselves to be sidetracked by the isolated sales opportunity.

You think about it. Are you focused on delivering a few key products or services to a few key customers or industries?

Key Idea #4: Find the Good in People and in Situations. Meena tells us that she always knew that Shiv would be successful because he is such a positive person that he could not fail. Shiv tells us that when he was concerned about the economic risk to his family if he started his own business, Meena told him to go for it. So it seems that we have two positive people here, and they make a great combination.

Topic for Discussion: What’s the benefit of a positive outlook to a business owner? What does it have to do with success?

Answer: Business is fraught with risk and there’s probably nothing easier to talk yourself out of than starting your own business. If you dwell on everything that might go wrong, you can generate quite a list for yourself. And Murphy’s Law will prevail; some things inevitably will go wrong. You’ll wind up delivering a poor product or service on occasion and you’ll have to make amends, you’ll make some hiring errors and have to deal with a disgruntled and/or inept employee, some customers will make unreasonable demands and some customers won’t pay you, some suppliers will promise delivery and then fail to deliver or deliver a substandard product, your cash flow will be tight on occasion and you’ll wonder how you are going to meet payroll. These are things that happen to virtually all small business owners at one point or another.

What do you do when something goes wrong? You fix it. What do you do when you fail? You pick yourself up, dust yourself off, and try again. Positive people can do this -- negative people cannot. If you see the glass as half-empty and the sky as partly cloudy, then business ownership is probably not for you.

You think about it. Are you a positive person and have you surrounded yourself with other positive people?

Key Idea #5: Find and Depend Upon Mentors. Shiv’s grandfather had an enormous influence on him. For 60 years, he worked with the children of mothers who had lost their husbands. The children came and lived with him and he educated them. Shiv witnessed first hand, at a young and impressionable age, the enormous influence his grandfather had on his students and the respect those students had for his grandfather.

Topic for Discussion: We’re business owners, not teachers. Is education really that important?

Answer: You bet! Education positions us for success by broadening our minds, empowering us to be creative and innovative. Education goes way beyond the reading, writing and arithmetic skills we first acquire, and past the formal education we receive, regardless of the level. If we don’t keep learning, we get ripe and rot! All business owners need mentors. It may be a relative, a trusted friend, even a customer or supplier. Mentors force us to think strategically long range, not just operationally in the day-to-day running of the business.

How much do I want to grow my business and how quickly? Is the business I have the business I want to have five years from now? What additional products and services can I add to my arsenal to expand my offerings to my customers? These are just a few of the questions that might be topics for discussion between you and your mentor. Some business owners formalize their mentoring process through the establishment of a Board of Advisors. A Board of Advisors is very different from a Board of Directors, which has authorities, such as the firing and hiring of the CEO, which most small business owners are not prepared to relinquish. A Board of Advisors is a Board of Mentors, where a collective body of intellectual capital nurtures the spirit and creativity of the owner in periodic meetings.

You think about it. Do you have a mentor? Do you meet with him or her often? Are you thinking strategically in your discussions with your mentor?

Key Idea #6: Mentor Others - Start a Mentor-Protégé Program. Just as you need a mentor, you need to establish mentoring relationships within your own business and consider mentoring outside of the business as part of your community service. Mentoring is a form of giving, and when we give of ourselves we give the greatest gift we have.

Topic for Discussion: Why are mentoring relationships important within a business?

Answer: Mentoring in a business environment is a form of coaching and nurturing. Nurtured employees develop to their full potential, have strong loyalties to their employer, and maintain a strong work ethic. Mentoring is not cross-training or providing employees with new skills. Just as you reserve your precious time with your mentor to think strategically, to concentrate on the forest and not the trees, the time the Mentor-Protégé within the business spend together is focused on the strategic plan of the employee and how it fits with the strategic plan of the company.

Mentoring relationships within a company may be informal, formal, or both. Informal mentoring relationships should be fostered between all supervisor-subordinate relationships throughout the company, regardless of its size. We should communicate with those who report to us as mentors. This means nurturing the employee by the manner in which we speak to him or her, praising them for a job well done, and correcting them, when necessary, in a constructive manner.

Formal mentoring relationships, where a mentor is assigned a specific individual to mentor, may also be appropriate in your business, particularly if you have a key employee nearing retirement age (perhaps you) and an heir apparent within the company for the same position. Establishing a mentor-protégé relationship now forces the pair to spend some time together outside of their respective operational functions and reporting lines. It puts the corporate imprimatur on conversations between the two about the challenges of the senior position, the opportunities for enhancing its role and responsibilities within the company, and a myriad of topics that might otherwise never come up. Providing the heir apparent an appropriate venue for mining the intellectual capital of the executive about to retire will reap enormous benefit when the heir is on his or her own.

You think about it. What kind of mentoring relationships do you see in your business? Should you be doing more to encourage mentoring among your employees?

The Lightbulb Key Idea #7: Make Sure Someone on Your Team Is a People Person. Shiv is certainly a people person and we can see how his goodness and charm have contributed to his success.

Topic for discussion: Why does a small business need a people person at the helm?

Answer: Successful businesses operate as a team and the team has a coach, the CEO. The coach motivates, inspires, and nurtures the team, but the coach never wins the game, the team does! Most small business owners are people-people. There’s so much personal contact in owning your own business, with employees, customers and suppliers, that owning your own business just isn’t very attractive if you don’t genuinely enjoy meeting new people and interacting with them. Occasionally, though, a person who is more comfortable in the laboratory or in front of a computer has a marvelous idea for a new business. When that is the case, it’s a good idea to find someone else to function as CEO of the company. And that’s OK. People who are not people-people are not bad people. They just aren’t suited for the coach’s role.

You think about it. Are you a people person?

Key Idea #8: Demonstrate That You Are Bankable. Shiv was able to found INDUS without financing but he needed a banking relationship to grow his company. Growing a company by reinvesting the profits from one sale into the next, often called “organic growth” is slow and painstaking. Business owners need cash to fund payroll while waiting to collect receivables for product or work that has already been delivered. This gap is often covered by a line of credit from a bank, where the bank takes a security interest in the underlying asset, the account receivable, and provides the cash to fund the operating costs that will generate additional sales and receivables. Shiv was actually able to obtain bank financing based on a purchase order from a customer. This is very unusual since the loan was unsecured and banks very rarely make unsecured loans. Shiv was able to demonstrate to the bank that INDUS had the potential to be a great company and a great bank customer. INDUS still banks at the first bank that provided a loan to the company.

Topic for Discussion: How does a growing business demonstrate that it is bankable to a bank?

Answer: Bankers are not risk takers. They operate on a very slim margin; the differential between their cost of money and the interest they earn on outstanding loans must cover the cost of bank operations and provide a reasonable return on investment to the bank’s stockholders. If a banker makes a bad loan -- a loan that has to be written-off -- it is the same thing as when one of our customers doesn’t pay us. The write-off is equal to the sales or revenue amount, the labor and inventory costs have already been incurred. The loss goes right to the bottom line. All companies have bad debts. In fact if you don’t have bad debts, your credit policies are too tight and you are losing sales. But companies that operate on a slim margin, such as banks, have to be particularly careful to minimize uncollectible amounts.

Obtaining a loan with less than a year of operating history and without collateral is very difficult for a small business owner. You must be prepared to shop and shop hard. Anticipate rejection and you will not be disappointed. Like Shiv, you are more likely to be successful at a community or local bank than at an office of a regional or national bank. Larger banks have stricter internal policies; smaller banks tend to vest more decision-making authority in the banker.

If you feel your business loan will be difficult to obtain, before approaching a bank, prepare a written financing proposal. This proposal should include your business plan plus the following:

• Projected financial statements
• Resumes of key management
• Current customer list
• Current supplier list
• Amount of financing requested and purpose of funds
• Demonstration of capacity to repay

In short, everything! You really want your banker to know you and your company. When you obtain an expression of interest, invite the banker to your business and show him or her how you operate. Inspire the banker with your passion for business and your loyalty to your business partners. If the banker believes a risk now on a small loan will lead to a big customer borrowing large amounts, then he or she will be much more likely to step outside of conventional bank financing parameters.

You think about it. Could you grow your business quicker with bank financing? Are you bankable?

Key Idea #9: Create a Worry-Free Workplace for Employees. Shiv told us that INDUS is in the business of "deploying intellectual capital from our people to our customers." He feels very strongly that establishing a worry-free environment for his employees optimizes their ability to deploy successfully.

Topic for Discussion: Why is employee satisfaction so important in a small business?

Answer: Satisfied or happy workers are productive workers. As business owners, we need to make sure our employees are satisfied as part of taking care of our customers. If the employees are dissatisfied, our customers will not be treated well. How do we keep our employees level of satisfaction high? We only need to do three things:

• Follow the golden rule, treat all employees with respect.
• Provide them with the necessary resources, capital, financial and human, to meet our expectations and do their jobs well.
• Compensate them fairly.

If we do these three things, our employees have nothing to worry about. We have established a work environment that optimizes their chances for success and positions us to hold them accountable to the highest standard.

You think about it. Would your employees say they work in a worry-free environment?

Key Idea #10: Make Sure Your Spouse is Your Cheerleader. Shiv could not have succeeded without the 100% level of support provided by Meena. She believed in her husband’s dream because she believed in him. When Shiv and Meena signed on the dotted line and pledged everything they owned to that dream, you know that must have been a scary moment. But they took the plunge and never looked back.

Topic for Discussion: How does a small business owner gain the support of his or her spouse for the start-up business?

Answer: First and foremost, communication is the key. Make sure your spouse clearly understands the risks you are taking and why you believe the risk is justified. Do not shelter your partner. Share the challenges and the defeats as well as the victories. Be open and honest about the facts as well as the fears. Anything less can lead to recriminations and animosity.

Many small businesses are able to start because one spouse is employed while the other spouse works without salary in the new business. With a few adjustments in lifestyle, the family lives on half (or less) of its previous level of income and the entrepreneur devotes himself or herself full-time (or more) to the new venture. The employed spouse is very often much more committed to his or her spouse than to the new business. That’s OK. Not everyone is cut out to be a small business owner. But never interpret the lack of interest in business ownership as a lack of interest in the business owner. Empower your spouse to be your biggest fan by sharing the little things and the big things. Bring the business home to your spouse and let him or her share in your excitement as you make your dream a reality.

You think about it. Is your spouse your biggest cheerleader?

Bonus Key Idea: Consider Global Sourcing. Shiv and Meena have 20 employees in India. With the difference in time zones, they are able to offer 24 X 7 support, something of great value to their customers.

Topic for discussion: How can global sourcing benefit a small business?

Answer: The World Wide Web has changed our lives forever. The opportunities to communicate and collaborate without regard to geographical location are truly mind boggling. Every business, no matter the size, can take advantage of these opportunities. No longer are we limited to finding qualified employees in the physical area of our business. If we can make the tools of our business available to our employees in electronic form, then the world is our recruiting farm. Databases and data mining techniques are now user friendly and relatively low cost. Expanding our sales forces around the world, with electronic product information flowing in one direction and sales orders with shipping instructions flowing in the other, is a realistic scenario for the smallest business.

Internet niche businesses are starting every day to assist us in taking advantage of these emerging technologies. For example, there are several businesses that offer Web-based board rooms for meetings. Remember that Advisory Board we were talking about? Your mentors don’t have to be limited to your physical area; you can recruit Advisory Board members from around the world, post meeting materials in advance, and then meet on line. All for a nominal cost, far less than the cost of air travel and lodging. We used to say “think globally, act locally” but this is no longer the case. Now we need to think AND act globally to take full advantage of the evolving marketplace.

You think about it. Are you thinking and acting globally?