Business Management

Keeping up to date on legal matters is usually the last thing on the to do list of most small business owners; unless of course we need a lawyer fast. Last week I was invited to a Business Briefing by a friend and business attorney. He gave a brief overview of risk management. That sounded too corporate for the small business owners in the room, so we asked how risk management affects us?

Generally, Risk Management is the process of measuring, or assessing risk and then developing strategies to manage the risk. In general, the overview covered several areas of business that business owners need to stay on top of.

Basically , we need to look at the structure of the business, which in some cases will dictate what kind and amount of insurance is needed to protect us and the business. The highest awards given by the courts is in the area of employee liability cases. So keeping good personnel records can help avoid risk in the employment areas.

What risks do you take in your business practices? Your proprietary information should be protected with confidentiality agreements. Do you keep records on self renewing contracts? There was mention that some companies prohibit cell phones with cameras, so as to avoid theft of information.

One of the areas I have heard many horror stories about is the financial. Business owners have abdicated the bill paying, collections, check writing and even credit card use to one person, only to find out that thousands of dollars turn up missing. Create some checks and balances, even if you are doing it yourself, it is essential.

Another area we don’t often relate risk management to is marketing. Registering your business name, having copyrights designated or getting permission to use copyrighted material are all areas of marketing that put us at risk.

Here is a process for reviewing your risk:

1. Identify potential areas (Business Structure, Employment, Business Practices, Financial, Marketing).
2. Analyse the source of the risk or the cause of the potential problem.
3. Evaluate what steps can be taken, ( there may be a way to transfer the risk, avoid it all together, reduce the amount or simply accept the risk)

In any case consult the appropriate people, an attorney, your insurance person, your advisors – remember your business is too important to leave to chance.

The Challenge: Take step one and identify a potential area of your business that might be at risk.

Turning dreams to reality as Small Business Owners Sharing Insights and Influence

Could you use some support to help you set, reach and add vision to your goals for growing your business? No great entrepreneurial enterprise was ever created in isolation. Surround yourself with smart business owners and you’re much more likely to succeed.

Mind Masters provides a value based program so that business owners harness the power of each members’ success, make wise business decisions and realize dreams. Visitors please check out our services.

Hear what our members have to say about Mind Masters!

Are you keeping up with the pace of change? The pace of technology? The pace of your marketplace? The pace of your competition? The 2006 Dilemma is how much do you and your business have to change to keep pace? As a business owner you need to have information at your finger tips that help you make the best decisions.

Planning for 2006 is a hands on process. You might start by asking some tough questions. Do you recognize the need for change?

• Are you prepared to look reality in the face?
• Are you willing to change the way you do business – and change yourself?
• Will you turn the plan into action?
• Do you have the guts to take your business in new directions?

I would like to lay out a road map that will get you to view your business through a lens that eliminates the distortions of everyday business. Let me warn you, you may not like what you see. But if you are going to meet 2006 head on it is a necessary process. Let’s look at what a strategic plan could do for you.

1. Develop a statement of purpose. Why does your business
   exist?
   Sometimes why we started the business is not the same as why we continue to work it. One of my long time clients over the years has added staff, and possibly her successor, so that now she can travel more. The business was started so she could support her family.
2. Conduct a SWOT analysis. This will help you evaluate
   your business’ internal strengths and weaknesses, along with the opportunities
   and threats you face in the market place. It will give you a basis for
   developing a plan.
3. Crystallize your thinking – Determine what specific
   long range goals you want for your business. It is never enough to just
   want more money. They should cover all aspects of the business.
4. Create benchmarks, with specific results for meeting
   those goals. It is easier to make adjustments along the way without
   losing sight of the long range goals.
5. Brainstorm strategies for reaching each of the results.
   There is more than one way to achieve a result, ask others for ideas.
6. Develop a Plan of Action. Plan the progressive steps,
   along with who will do what when. Nothing ever happens without action,
   but there is a world of difference between mere action and constructive
   action.
7. Be confident in yourself and your own abilities.
   Be determined to follow through on your plan, because without determination
   the plan will deteriorate.

The 8th step is to track your progress. Write out your numbers (yes I said write), know your sales number, gross profit, cost of goods/time. It is a sure way of staying focused.

Barbara’s Notes:
As small business owners it is important that we understand and follow the letter of the law with regard to the information we collect about our customers. Darity Wesley is the “privacy guru” for the real estate industry, but her information affects all of us both personally and professionally. Privacy Solutions offers on line privacy statement options for your web site that will keep you within the law, check it out if you don’t already have one, (www.privacygurus.com). The following article is reprinted with permission.

What is “Privacy”?
By Darity Wesley

“I also thought that privacy was something we were granted in the Constitution. I have learned in fact that the word privacy does not appear in the Constitution.”

-Bill Maher

To set the record straight, the U.S. Constitution does not provide any explicit right to privacy. The landmark ChoicePoint incident that compromised consumers’ personally identifiable information and made it available to identity thieves has been a hot topic in the news. Privacy and its role in our daily lives is an important discussion in our personal as well as professional worlds.

Privacy has been an issue over the millennia. In ancient cultures, the ability to run off from the tribe, to hide out in a cave and not participate was considered “privacy”. As we moved into the Industrial Age, a new concept was raised in an 1890 Harvard Law Review article written by Louis D. Brandies, who served on the U. S. Supreme Court from 1916-1939, and his Boston law partner Samuel D. Warren. The article, which was apparently a response to newspaper reports published regarding the behavior of Warren’s wife in social settings, defined privacy as “the right to be left alone”. Now engaged in the 21st century, we find our world evolves into asking what is our “expectation of privacy”? We have, or should have, different expectations depending what we are talking about.

I have found four general areas of privacy: bodily, territorial, communications, and information.

• Bodily Privacy
  We expect that our bodies are private, unless we as a society have agreed otherwise. For example, if we are in an airport security line and the metal detector beeps as we walk through the scanner. We expect to be searched. Or if we agree to having drug tests as a condition of employment. Or we are renewing our driver’s license and agree as a condition of having that license to submit a thumb print.
• Territorial Privacy
  We expect that our homes are private. However, when we walk into a convenience store or up to the ATM, we know or should know that we are being video taped. Or we are at an intersection with a red light traffic camera there to record violators of the red light.
• Communication Privacy
  We expect that our personal conversations are private. But our expectation changes, or should change, if we are on a cell phone versus a land line. We expect that our letters signed, sealed and mailed with the postal service are private but our expectation changes, or should change, when sending email. It is not in any way “private” .
• Information Privacy
  We expect that our financial information at the bank and the health concerns we discuss with our doctors is confidential. However, anyone can watch what our work-out routines are at the fitness center and we expect that a number of people will know what we buy at the store. The act of purchasing is a public act, for which there is no reasonable expectation of privacy.

When doing business the information you collect, like an email address or any financial information, is not public record. It is considered “personally identifiable information” under the new laws. What happens to that data after it is disclosed is up to you. And in today’s volatile privacy controversy, being the steward of that information can be a big responsibility. Understanding your clients’ and prospects’ “expectation of privacy” with the regard to the information they provide to you will add to their benefits of using your professional services, and you should tell them so. Additionally, you protecting their information will create an atmosphere of trust and loyalty which will make you stand heads and shoulders above the rest.

Darity Wesley is CEO and Legal Counsel for Privacy Solutions, Inc. a San Diego based consulting firm. Her team of Privacy Gurus® work with you to create policies and procedures to establish the expectation of privacy for your member, clients, customers, prospects, affiliates, associates, employees and vendors. You can reach her at (619)670-9462 or Darity@privacygurus.com, Visit our website at www.privacygurus.com

The Challenge: Review your policy and procedures with regard to how you handle, process, file and dispose of client information. You may be putting yourself and your business in jeopardy. Let us know if you have any concerns.

Here we are again just past the October 15th deadline! It has amazed me the number of people who were still racing to make that deadline. As small business owners it is important to be using this time of the year for looking ahead to plans and projections for the New Year. Growth in any business challenges your skills as a business manager and your financial resources, putting you on a tight rope.

One step on that tight rope involves a comprehensive plan that clearly outlines where your business stands now (not last year), its assets, debts and the current and future profit opportunities for your business. Those profit opportunities often get you out further on the tight rope as your accounts receivable and inventory costs begin to increase. Or perhaps with service businesses, marketing costs increasing.

Projections are often behind schedule of the goals you set and take longer than you initially planned, putting stress on your finances as well as managing the balance between growth, collections, higher credit requirements as well as sales, pricing and your personal involvement and time spent in the business.

This is the time of the year to do some tax planning (not tax filing), like identifying the needs for business equipment (a good tax deduction) and purchasing and using it this year based on the taxable income of the business. To monitor the progress of your business and manage it accordingly, begin now to catch up on this years accounting and prepare a spending plan for next year. In order to make it to the other side of the tight rope, an accurate budget is key to determining how much spending you can safely afford.

Managing your resources is important to the growth and stability of your business. Plan now to come into the New Year with a handle on growth, instead of behind it. Keeping your balance requires persistence, stay on top of your finances, it will give you the an excellent screening device for setting and achieving your goals for profitability and growth in the coming year.

Your success in business comes down to the difference between managing your work or letting your work manage you. What’s it going to be? The biggest contributors to clutter are those good old fashion letters, junk mail, memos, e-mail printouts and sticky notes, So how do you sort through all the junk and all the distractions and concentrate only on the things that are important to you and your business? In business ownership and management, as in war and other activities, you are only as good as your last success. Just as you always have to be on the lookout for the next opportunity, you also have to be on the alert for the next crisis. That is what being organized is all about. You don’t want to waste your time on useless trivia when important issues that have significant impact on your customers or your organization deserve your attention.

Delegation is an ideal way that allows you to work on important tasks. As your business grows, your functional responsibilities normally grow past the point where you can cope with all the duties which must be handled. As this process of growth occurs, you must begin to delegate specific duties to insure that all necessary tasks are carried out. This means hiring someone on a full or part time basis and properly training them. It is important to have performance guidelines with proper follow up procedures for the delegated assignments. In some instances people who do outside services can take up the slack.

Remember, a well managed business achieves results. Good management requires passing down the authority to get the job done and allows you to get on with the high priority, high payoff activities of your business.

One of the most important steps in the Mind Masters program is planning. A business plan requires an action plan that will have specific and measurable results. Here is a suggested proven planning method that if you are truly committed to improving your management skills you can become a planning master overnight. What would it mean to you if you planned every business day on paper prior to the day starting?

1. Block 30 minutes each week to review the week and your Quarterly plan and determine the actions you will need to take that week to achieve those results.
2. Block 10-14 minutes daily to plan the day. No cell phone, no e-mail, no distractions, just planning.
3. With your goals in front of you ask yourself if the activities you listed will help you achieve those goals.
4. Prioritize your action items for the day. Put an asterisk next to your 5 most important (valuable) action items.

I challenge you to prepare for business growth through better organization, delegation and time management. Remember as a business owner setting a standard of consistent behaviors leads you to achieve results that carry over to all areas of your life.

As I was preparing the flyer for Mind Masters 3rd Quarter Planning workshop I had the realization that by June 30th half of the year would be finished. How many of you after these several months working day and night to achieve those goals you set in January to create a new service, introduce a new product or even design a new business model – all at once find all the drive that brought the initial motivation and excitement has melted away, the steam has run out, the place you are in is comfortable and the dream world has slipped out from under?

This is the wake up call. You must reawaken the drive and motivation, you must motivate yourself! Once you accept that your on going success must come from you, you can build a comprehensive program that will keep you moving forward. You are the catalyst for your business, you must press on, you cannot afford to stand still. Let’s review some thoughts on creating your own personal motivation “touch stone”.

1. Revisit your goals and make sure they have time frames for their accomplishment. Keep a list of other dreams so there is always an on going program for continued motivation.
2. Create specific measurable results and actions for the achievement of your goals. Write out the steps so you can check off your progress.
3. Articulate a personal purpose, it will give meaning to the goals you choose and enhance your desire. Your personality will take on a dynamic magnetism that drives everything to you.
4. Maintain an unshakeable belief in your ability to fulfill your purpose and therefore your goals. List your qualities, abilities and achievements- you will see you have what it takes, so have confidence in them and use them as steps to your next success.
5. Recognize obstacles as learning steps that cross your path and determine to overcome them. And when your purpose and goals are worthwhile the mind can overcome any situation, or circumstances that stands in your way.

The Challenge: What do you need to do to make a “mid-year leap”?

One of the questions I often get from my members is, “when is the right time to incorporate”? The answer is often the question of liability that one needs to take into consideration before deciding which entity best suits ones business needs. Do you have employees that put you at risk driving your business vehicle or dealing with customers? Each business entity has its advantages and drawbacks, benefits and tax consequences.

Picture a situation where an employee is driving with you in your vehicle and you are in an accident. The accident is not your fault but your employee gets injured. You are now in a position where the employee’s lawyer decides they need to sue you too. What kind of protection do you have?

Most small businesses are started as sole proprietorships to allow an individual the independence, flexibility and minimum government red tape giving him/her absolute control. Taxes are filed on a regular 1040 form with a schedule C attached. Employee benefit premiums are deductible. However, Linda Harris of Harris Insurance and Financial Services says that the disadvantages of the sole proprietor are so profound that I will quote her explanation.

“The sole proprietorship is limited by the personal financial resources of the owner and the ability to obtain credit and borrow money. The sole proprietorship is also limited in terms of business talent and ability and the success of the business generally is tied to the ingenuity, initiative, resourcefulness and managerial abilities of the sole owner. ”

Without proper planning the employee in the above scenario could wind up owning the assets of the business and other personal assets as well. Creditors may attach personal resources (home, bank accounts, retirement accounts, etc) in the event of a business failure. Also what happens to a sole proprietorship upon the death of the owner? In general, state laws provide that all of a sole proprietor’s business activities cease at the owner’s death.

Without getting over my head in legalities, let’s look at the General Corporation advantages that could offset the sole proprietorship disadvantages. There is limited liability as all responsibility for debt and liability fall on the corporation. That means creditors cannot attach personal assets of the share holders. Financing is generally more easily secured, as corporations have a more stable appearance, whether or not it is true. Unless there is a restriction on the transfer of stock, shareholder’s interests are freely transferable. As a separate legal entity, a corporation enjoys perpetual existence.

Often small business owners fail to value their sole proprietorships and do not adequately plan for its security or continuance. It is important to review all of the benefits and drawbacks of incorporating with your attorney, CPA and financial planner so you understand the financial impact on the business and your family.

Linda Harris has spent 25 years in the insurance and financial industry working with small business owners, finding them the solutions they need for succession planning and fringe benefits for the business. She can be reached at 858-695-1162 for any questions.