“What?” Was my reply. By then my friend who was running errands with me was already out of the car and had gone into the station. Before I could process what the relationship was between filling up with gas and “little donuts,” he was walking out with a little donut, telling me:

“These are delicious!”

I filled up the car with gas and then went into the station. There on the inside was the “American Entrepreneurial Spirit” alive and well and hard at work. Half of the interior of the station was dedicated to a donut shop named: “Peace, Love, and Little Donuts.” If you are from Pittsburgh, this may not be news to you because I have learned there are three such shops there.

What most impressed me about this one was that it was staffed by the owner, Mark Couch, whose enthusiasm about his products was infectious. Not only was there a cart full of the most delicious looking little donuts, but Mark engaged me in making my choice and encouraged me to try a cup of his “Intelligentsia” brand of fresh roasted coffee. It’s a little expensive, he said, at $2.00 per cup, but it’s really good. “So are the donuts,” Mark told me with a proud smile. He was right. The coffee was great; so were the donuts.

What was even better than that was the feeling I had at seeing this former military and commercial pilot having fun, building his own small business.

I didn’t talk to him long enough or dig hard enough to see whether the shop was making money or not. (Mark Couch licensed the use of the name and the concept, but it is not a “franchise” shop. Mark continues to fly and instruct pilots, which he also loves.) I was too delighted to see how a solo entrepreneur doing what made America great—building a business around a creative idea—and better yet, partnering with a complementary business—a gas station on a busy highway.

Maybe not everyone in America can do something quite like this, but the point is, that this is America, and here, Mark could do it and so could millions of others. Instead of whining, complaining, or hoping for some government largesse, there was a young man, “doing his thing, and loving it.” I’ve said for a long time that the future of the new middle class in America will not be the old model of factories and factory workers (even though there will still be a lot of those jobs).

The new American middle class will be startups that grow.  Small businesses that thrive and get bigger, hiring people who care enough to be loyal and do a good job. This country can thrive again. All it needs is for big government to get out of the way and let the people make “Peace, Love and Little Donuts.”

If you are in Naples, Florida, stop in for a donut and some gas—but first go down the street a few blocks (on the other side of the street) to Pastrami Dan’s, the absolute best pastrami sandwich shop I’ve ever been in. But get there at the right time because Dan and his family run it and it’s only open (and mobbed) between 11 AM and 4 PM.

God bless these small business people and entrepreneurs and God bless the USA for making them possible.

Donuts Photo via Shutterstock

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When a new product development starts, it can be as a result of an idea, a competitive product, or the need for “something new” in the product line. Whatever the reason, as soon as a decision to proceed has been reached, cash starts to flow out. Designers, engineers, marketers and so forth are all working and being paid. Other expenditures also start. Market research must be done, or completed if some preceded the decision.

Prototypes must be built, which might mean an outlay for tooling and/or equipment. Testing must be done, perhaps at outside laboratories. Package designs are developed. Financial analysts develop costs and pricing models and the marketing and sales organization start to develop the launch plans.

A new product launch needs to have enough product to supply initial demand, and in many cases “fill the pipeline.” Remember, everything I have listed above costs money: salaries, benefits, suppliers, materials contractors or service providers, etc. No money has come in yet, but it is sure flowing out. The steps listed so far typically take weeks or months. If “hard tooling” like dyes, molds, etc. must be built to manufacture the product or its parts, that alone can take 3-6 months, with the time for trial runs, debugging, etc.

If equipment or a facility must be purchased or built the time frames are usually even longer. Six months or more is required to equip and tool and prepare to make a product — even if an existing facility is used. Finally, after all of the design, development, marketing, sales, engineering, manufacturing, supply chain, analysis/testing, and so on are done, products might be ready for sale. And 4-8 months, or more, will have elapsed.

When the first orders are obtained and the promotional launch is committed, still more money flows out. Advertising, brochures, a website, packaging, travel to customers or trade shows to “reveal and launch” the new product all consumer cash. But none has come in yet. At last, the new products are ready to ship. Transit time is fast. If they are made in the U. S., it takes a few days to a week. If the products are made outside the U. S. — say in China — some of the preliminary steps might move faster due to the long work days and weeks worked by Chinese manufacturers, but now delivery time via ocean freight is several weeks at best. Our 4-8 months has now stretched to 6-9 months since cash started flowing out, and still none is flowing in.

The product reaches the distribution center of the customers and after a few days more waiting, moves to the point of sale or use: a retail store or a distributor (more delay) or another factory where it is built into some other product. Then the payment terms start; payment terms are typically 30-60 days, or more. And most companies pay just a bit late. If we assume just 60 days (2 months), the first cash flowing in arrived 8-11 months after cash started flowing out. And this is without any “upsets.” Of course, things always go wrong, so let’s add another 30 days for miscellaneous, unforeseen delays at some point(s) in the process.

There you have it. Money finally starts flowing into the company. Assuming the company rapidly receives and deposits the payment and there are no “disputes” about any part of it, the cash-to-cash cycle is complete. The cash-to cash cycle time is about 9 months to a year after it started flowing out. Unbelievable, right? But it can easily be more than that, which is why so many startups run out of cash. Plan wisely and keep track of your cash reserves, now that you know how to calculate your cash-to-cash cycle.

Editor’s Note: This article was previously published at OPENForum.com under the title: “Don’t Underestimate the Cash-to-Cash Cycle.” It is republished here with permission.

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As you wait anxiously for signs of a recovery, your concern must be to arrest the decline of prices (and to reduce costs to match the decline). Otherwise, profitability—or what’s left of it—will suffer.

Inflation

Most people understand inflation. It occurs when more money is created than there is tangible value to support it. With the massive government spending surge and money supply growth in the past year or two, inflation should be a concern. Right now, it isn’t, which is surprising.

The reason that inflation remains tamed is that there is too much idle capacity, chasing an too little demand. When the rate of inflation keeps dropping, as it has lately, that is called disinflation. It is troubling at times, but also manageable if costs can be reduced. Disinflation is not to be confused with deflation.

Deflation

Deflation is a different and more dangerous phenomenon than disinflation. It has rarely been seen (except in theory) in the past few decades. Japan suffered from deflation and it literally crippled the Japanese economy. Deflation is when the rate of inflation goes negative—less money will buy more value—and buyers wait to buy, expecting that the longer they wait, the lower the price goes.

At least one of the causes of deflation is massive global over-capacity, which drives prices down as sellers try to fuel demand with price concessions. Another cause can be adequate capacity combined with a collapse in demand. This cause feeds on itself. With inflation expected, there is a motivation to buy before prices go higher. When facing deflation, the assumption that prices will be lower in the future causes postponed buying and fuels the collapse in demand.

The most apt example of deflation in the U.S. is in new home construction in formerly “hot” markets like Florida and California—where declines in demand reached 75-90 percent. A tremendous amount of construction capacity was built during the boom years. Much of it has disappeared as many companies failed but too much still remains. This overhang of capacity leads contractors to bid lower and lower prices, until there is no profitability left for anyone. Unscrupulous contractors will then start to cut corners on quality.

Buyers realize that this condition exists and hold off on commitments, expecting falling prices from contractors and raw material suppliers. Desperate for enough business to “stay in business” these contractors and suppliers oblige, lowering prices again and again. This further damages the viability of the industry.

There are a few positive causes for deflation—like greatly increased productivity. Walmart flexed its buying muscle and employed much improved supply chain management to lower the cost of goods again and again. Buying “more (goods) for less (money)” became commonplace. New technology can also be a positive reason for deflation—consider how the explosion of networked computers/communications devices drove down the cost of telephone and cell phone calls. But always, there is always a “price/value floor”—somewhere.

A Vicious Cycle—Until the “Floor” Is Reached

What happens as industries start to fuel the deflationary cycle is instructive. A deflationary spiral can lead to recessions and worse—collapses of whole industries or even entire economies. This is why Federal Central Banks are so afraid of deflation. It simply doesn’t respond to traditional monetary policy solutions. As demand falls, prices decline. Producers chase sales with lower prices and the postponed buying decision is reinforced. More buyers wait longer and buy cheaper, keeping the spiral going, until the “floor”—a price at which no one can supply and survive—is reached.

What Can You Do?

Since most readers cannot influence such things as Fed monetary policy, or global trade policies, let’s focus on what you can do.

• Manage the part of the business you control better, reacting to changes faster and more intelligently. The first step is to understand and recognize the nature of the problem fully.
• Develop early warning systems to detect the onset of a deflationary cycle, gathering information from the marketplace and sharing it rapidly within the company. Anticipate shifts carefully, stay flexible and shop hard/buy sharp.
• Use Cost-Impact-Analysis, which breaks down the components of costs to identify the impact of changes in the cost of labor, the expense elements in overhead, fluctuations in commodity prices, changes in productivity or external factors (e.g., transportation costs). Once expected changes in costs are quantified, strategies can be developed to deal with them before the impact is felt.
• Make material substitutions, which can reduce commodity cost influences; shift sourcing to lower-cost countries/suppliers. Eliminate waste or change your supply chain to remove non-value-added costs.
• Find productivity improvements—one of the most powerful tools—using Lean principles, Six-Sigma® and many other approaches.
• Resort to “old-fashioned” Value Analysis—developed at GE in the 1950s—useful in making the cost-value tradeoffs and maximizing value at a given cost/price level.

All of these are effective approaches to managing in a deflationary cycle. None of them will stop deflation per se, but enough companies acting similarly will slow its spiral. Governmental policies must address it through macro-economic influences such as monetary and trade policy, etc. These are usually outside the control of most managers/executives.

Just Say “No!”

However, selling based on value and not price, and not resorting to irrational pricing (below cost) or price wars, can also help arrest deflation. Sometimes, you just have to say “No, I cannot sell you at that price.”

If/when the buyers begin to sense that prices have reached the “floor”—the level at which value can no longer be sustained at any lower price—they will stop waiting to buy. It is then that deflation has been contained. Then innovation can begin to gain traction, creating new, more valuable products or services, for which buyers will be willing to pay higher prices.

Managing during disinflation is hard; managing during deflation is much harder. Managing in a deflationary environment turns all the things you learned for years upside down.

Albert Einstein admonished us:  “The world we have created today has problems which cannot be solved by thinking the way we thought when we created them.” Only if you manage differently, use new tools, gain new insights and then act fast, can you stem the tide of deflation and minimize its damaging effects.

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If that is the goal, then what gets in the way more often than anything else? The answer is two-fold.

The first explanation involves “people working on the wrong things. Inadequate staffing in quality of quantity can stifle growth. But so can spending valuable people-time working on the wrong things-either customers or products that are not profitable or market segments that are unattractive (for a whole range of reasons)-or it could be just battling complexity caused by customer, product or market proliferation in the past.

The second (and most common) problem is shortages of working capital. Few small companies and a surprising number of larger ones overlook what I call the “working capital trap.” Here’s how companies fall into the working capital trap and what kind of damage it can do.

A New Product is Born

In most cases the outflow of money starts immediately (in any project, job, etc.) and the inflow is delayed-often for a very long time. Take a simple example: a product introduction. Money is spent developing the product idea and documenting it. Salaries, expenses, prototypes, intellectual property filings and many more causes must be funded before a product can be sold.

Next, the product must be marketed and sold. This also costs money and takes time. Sales calls, travel to customers, marketing materials, advertising, promotion, making and shipping samples all require expenditures. All of these expenses hit before the first sale is ever made. After a sale is made and the order taken, more expenses come next.

Materials/services must be purchased and labor spent to convert materials into parts and then into the products. Additional expenses like outside services, rent for facilities, insurance, etc. are also required expenses. Even if there is vacant space in existing facilities, there are costs for supplies, setup and supporting staff.

Finally, you have products to sell and are ready to ship. Picking, packing and loading the products come next. That takes manpower and money, and more supplies (cartons, banding or shrink/stretch wrap for palletized goods, labels, forms, etc). Unless the right freight terms are negotiated, the freight may also be an upfront expense to pay.

At last, the invoice can be sent to the customer, and then you wait for payment. Most terms are at least 30 days… or more. Still, no money has flowed into the company. Every step I have described thus far requires money-working capital-to pay the bills that are incurred and come due along the way.

The “cash-to-cash time” is the time from when the first spending until the payment for the first shipment is received. Cash starts flowing out for salaries and office expenses when the product/service creation starts, and goes on from there until a sale is made and the payment collected. It is not unusual for the “cash-to-cash” time to be nine months-or more (the gestation period for a human baby). And yet, few companies even know what their “cash-to-cash” time is. Hundreds, thousands or even millions of dollars might be spent before a single dollar is received in payment.

TO DO: Calculate your cash-to-cash time on a major new product/project.

Working Capital

What covers these expenses? Working capital. Where do you get it? From retained earnings derived from prior profitable time periods, or from loans-which seem to be harder and harder to get. Careful planning can reduce the required working capital needs. Some industries require a deposit with the order (typical in large, single purpose capital goods items). That helps. Some companies can negotiate extended terms with suppliers, and even hold off some supplier payment until customer payments are received. But this is uncommon.

TO DO: Make a 13-26 week detailed Cash Flow-in & out-projection week by week.

Growth Increases the Need for WC

The first product was a success and the next round of orders is much larger. What do you need more of then? More parts, more labor and more working capital to pay the bills while the product is being produced, sold and payment is coming! Thus the result of success is the need for even more working capital. Then this cycle repeats itself. IF the product is handsomely profitable, the profit can fund part of the new working capital need, but usually only a fraction of it. That means more investment from company owners or larger loans from the bank.

TO DO: Make a projection of the added working capital needed to provide cash flow for a sizable increase in sales.

The Bigger You Get, the More You Need

Growth is great; profitable growth is even better. But even then, it is necessary to find, earn or borrow enough working capital to cover the cash flow needs of the cash-to-cash cycle. How much will you need? That is where the “forward cash flow projection” listed as a TO DO earlier becomes critically important. This projection lists, by time period (usually weeks) for a period into the future every outflow of cash and every inflow of cash, in the time period when it is expected to happen.

Once this is done, what’s left at the bottom is called “availability.” That means how much cash (working capital in a real sense) you have left as of that time frame. If availability is projected to go negative (you run out of cash), that is very bad. You can’t pay bills or maybe even make payroll. When a customer is late paying you that reduces your availability still further. Can you survive that?

Suppliers may make it worse if they sense your company is in a working capital bind. Since they fear not getting paid, they may shorten payment terms or even demand cash in advance for materials. This is a very bad situation, indeed, since it drains your working capital and cash even faster.

Cash Is King

You may have heard the phrase, “Cash is King.” This is where it comes from. You might make a handsome profit at year-end-unless you never get there because you fell into the working capital trap and ran out of cash. That is how many otherwise competent companies fail and are forced to either go out of business or file bankruptcy and hope to reorganize. Now you understand the “working capital trap.” You are now aware of a few important TO DO steps. Forewarned is forearmed. Don’t let your otherwise viable company fail because it fell into the working capital trap.”

Editor’s Note: This article was previously published at OPENForum.com under the title: “The Working Capital Trap” It is republished here with permission.

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Here are 20 tips that are proven time or money savers. Time is money so the two savings are combined here. Since many small businesses are operated out of home offices, these will also save money and/or time at home. Choose the ones that work for you and start saving now.

1. STOP BUYING “STUFF”: If you don’t need something, don’t buy it — no matter how great the deal is.  There’s no right price for something you don’t really need. Learn the typical promotional cycles-clearance sales in January (before the retailers’ fiscal year end), for example.  Buy office products when the ones you need are on sale-plan ahead. Buy non-perishable holiday supplies after the holiday, and save money next year.

2. DIY (Do It Yourself) INSTEAD OF HIRING SOMEONE: Do the simple jobs yourself instead of hiring it done.  Janitorial services charge more if you have them empty wastebaskets and replace liners every day.  Few people fill wastebaskets daily, some don’t in a week.  Tell everyone where the dumpster is and have them plan to dump their trash while on another trip.  Ditto for window washing.  It’s nice to have clean windows, but staying in business is nicer.

3. SHOP FOR BEST BANKING DEALS: Switch bank accounts to the places where they offer free, unlimited check writing, no fees on accounts, etc.  Shop around and see whose deal is best.  If you plan to keep a healthy balance in any account, ask where it can be parked to earn interest and swept to the checking account when needed.

4. USE EMAIL TO AVOID PHONE TAG: Use email to set up phone calls and avoid frustrating phone tag.  Tell the person what you want to talk about, and whether you need a decision from them, information, or just a discussion.

5. PHOTO DOCUMENT MISHAPS: Use the camera on your cell phone to document mishaps.  Photos of the damage, an accident, the site where it happened, etc. can be invaluable if a dispute arises or an insurance claim needs to be filed.

6. USE EMAIL WISELY: Don’t argue on email.  It is damaging, counterproductive and usually escalates an argument instead of resolving it.  Meet face to face (first choice) or talk person to person on the phone.  Assume that you can and will resolve the argument and say so-that alone goes a long way to resolving it.  Don’t print emails unless you need a hard copy for some good reason – it just wastes paper, ink, time and money.

7. PRIVATE LABEL GOODS ARE GOOD BUYS: Buy private label goods where the store guarantees them or will replace them with brand names if you are dissatisfied.  Kroger and OfficeMax both do this.  Wal-Mart will match any competitor’s advertised deal-but bring the ad along.  Compare prices and learn who has the best deals, on what.

8. SHOP (& NEGOTIATE) GAS PRICES: Pay attention to which service stations seem to always have the best gas prices and plan fill ups.  If there is a loyalty program with a grocery store, wait to fill up until you can use a discount for more gallons of gas. Negotiate with your favorite gas station if you are a heavy user, or have a fleet of vehicles.  Ask for a discount-they are often available.  Use the right grade of gas for best mileage and don’t be a “lead foot,” it’s not a race.

9. COMBINE SAVINGS WITH GIFT CARDS: Take advantage of gift cards sold in stores with such programs (Giant Eagle is one such chain).  You can buy a $1,000 worth of stuff at Home Depot with two $500 gift cards purchased at Giant Eagle and save a lot on future gas purchases at Giant Eagle.

10. PLAN AHEAD -  AVOID WASTED TRAVEL TIME & FUEL: Plan trips, in fact, plan all activities, to avoid doubling back or traveling further than necessary.  Think of making a loop, hitting all the stops and ending up where you want to be. Arrange the pickups/dropoffs in an order that takes you out & back in the loop, not in & out, back and forth.  You’ll save time, fuel, wear & tear on vehicles-and money.

11. GROUP SIMILAR TASKS: Accumulate similar tasks and do them in a group.  Often the “make ready time” is a sizable part of the job, so whether its paying bills, returning calls, mailings, filing or whatever-group the work then “knock it out.”  Assembly lines in plants are efficient because they combine work in the best way.

12. MINIMIZE SMALL TALK – e.g., HOW’S THE WEATHER:  Small talk is nice, but it wastes time.  Discussing the weather is the most common time waster.  If you need to bond with someone ask about family, fun or favorite sports team.  Otherwise, get on with business.  That includes Texts and Twitter Tweets, unless there is a valid reason for them.

13. USE MEETING AGENDAS & TIMES: Don’t hold a meeting without an agenda, a time frame, and a statement of what is to be accomplished (information exchange, decision, next steps by whom and when, etc.)   Take notes and record who will do what by when — then follow up.  It’s a powerful time saving habit.

14. USE FEWER WORDS – GET TO THE POINT: Don’t write long letters or emails if short ones will do.  Ditto voicemails.  What’s the subject, what do you need (info, help, meet, etc.), when can you be reached with a call-back?

15. DON’T REPLY TO ALL: Don’t use the “reply to all” function.  It just makes more emails for everyone else to read, wasting time.  Occasionally an embarrassing email goes to someone who shouldn’t get it — and that can cause big trouble.

16. CONSOLIDATE INTO A SMART PHONE: Electronically consolidate all of your calendar, contact information, etc. on a “smart phone” which is backed up to your computer (in case of loss or damage). Preferably choose a smart phone will also do email, text messaging and have web access; most can also serve as a calculator, camera and alarm clock …  and more.  Print out your calendar and address book once in a while, and put it in a safe place — just in case.

17. SAVE ELECTRICITY: Turn off lights when no one’s around. (It doesn’t cost more to turn lights on and off.  It costs more to leave them on). Turn off copiers; unplug chargers, shut down computers over night. All use electricity even when idle. Use compact fluorescent bulbs or the new LED bulbs instead of incandescent bulbs — they use less electricity and pay off in savings over a few years.  Use timers (or motion sensor) to turn lights off — or on — when appropriate.

18. SAVE ON ALL UTILITIES: Turn down the thermostat  (or up) — one degree makes a difference; 2-3 saves more.  In winter, wear heavier clothing; in summer, dress cooler.  Use a programmable thermostat-reduce heat and A/C use when gone or sleeping.  Reduce water heater temperature settings; run only full loads in washers, dryers & dishwashers.  Maintain your HVAC, and it can save you money. A humidifier in winter keeps the air feeling warmer, and reduces health problems due to winter dryness.  Maintain furnace filters — change (or clean) them regularly.

19. BUNDLE YOUR TELECOMMUNICATIONS BUYS: Negotiate a bundle of your phone & electronic communications.  You get a better deal buying Internet, Phone and Data (and cable or satellite TV too, if you need it) from one source.  Shop around. Cell phones added to a plan and bundled minutes are very economical.  Call and ask for a better deal.  If you need to keep a “wired phone line” negotiate that deal too. If they can’t find one, talk to the department that keeps people from switching via price concessions (AT&T’s is called “Retention”).

20. CLIP COUPONS & USE THEM: Use coupons and deals aggressively for office products.  Some superstores will begin sending them every month.  Other stores will honor them even if expired.  Plan your purchases to maximize the savings-but only buy stuff you need.  Use affinity plans that give you discounts too.  Shop at super-discount places like Aldi Foods that sell house brands or generics.  Many are made by major manufacturers and are as good as brand name goods.  There are many coupon websites, and most major manufacturers, and some retailers have coupons too.

Finally, smile a lot and keep an upbeat attitude.  Make “saving time and money” into “fun.”  Give recognition to employees who find new ways of saving money.  A “certificate” and praise — in front of peers — are very valuable motivators.

If the people you work with see you with a positive, can do attitude, that’s contagious.  Try it — it works.

Editor’s note: this article was originally published at the American Express OPEN Forum.

* * * * *

About the Author: John L. Mariotti is President and CEO of The Enterprise Group. He was President of Huffy Bicycles, Group President of Rubbermaid Office Products Group, and now serves as a Director on several corporate boards. He has written eight business books and a novel and has been a conference keynote speaker, a radio talk-show host, and a multi-national columnist for IndustryWeek, Management Centre Europe, the American Management Association, Fortune Small Business, Tiempo de Mercadeo, and a contributor to Business – The Ultimate Resource and the Encyclopedia of Health Care Management. His electronic newsletter THE ENTERPRISE is published weekly. His Web site is The Enterprise Group.

The post 20 Tips to Save Time and Money in Your Small Business and At Home appeared first on Small Business Trends.

By John Mariotti

In spite of the fact that I have always been an early adopter of new technology — or communications-based tools, social media turns me off. When I think about why, at least 10 reasons come to mind.

I have signed myself onto a couple in their early stages — at the urging of friends — and that’s when I realized why I wouldn’t have anything more to do with them, at least until they get much further down their evolutionary trip and improve measurably. Here’s why:

1. Social Media/Networking is an invitation to at best, uncontrolled and permanent over-exposure, and at worst, identity theft or misuse.

2. All of us are drowning in a tidal wave of complexity already, and these social networking sites make this complexity worse by an order of magnitude.

3. Social networking is in the evolutionary stage, and as such, all of the sites that exist now will change, evolve become either more useful and secure or go away. The lessons are there in recent history: Compuserve, early versions of AOL, Prodigy and all the other now defunct or otherwise transitory Internet, email or proprietary Web systems

4. Just when a lot of people learn to use one of the social networking sites/systems, someone will come up with a newer, better, cooler or more fashionable one.

5. Security of social networking sites is as great a risk as passing business cards around in a busy bar. No matter how many times the site owner/operator promises your information will be protected, secure, etc., the lure of money will make them liars. Someone will buy the site for the contacts that come with it — period. Then they will sell those lists to as many people and companies as will pay for them, to do whatever they wish with them.

6. There are many other, more focused ways of networking and marketing instead of placing your identity, your information, photos, etc. in the public — very public — domain.

7. Real business people realize that this social networking trend is superficial. True relationships may originate in email or other similar venues, but must become personal and not electronic to be of meaningful value.

8. The hassle of meddling with your computer and the so-called “easy to use” interfaces of such social networking sites is far too great compared to the complexity it adds.

9. When I want to expand my network, I want to choose who will be involved and know that their involvement is willing and enthusiastic — not the result of an email and a few clicks of the mouse.

10. I am simply too busy to meddle with something that is at least largely populated with people who have nothing better to do with their time, or others who think is it somehow an easy way to really be connected to a lot of people.

Nothing good comes easy. If this were all it took, everyone in the world would be connected to everyone else in the world and it would all be such a wonderful place.

Perhaps in the near future someone will figure out Osama bin Laden’s email address and ask him and/or his cohorts to be our friends on Facebook or My Space, or some new, as yet unnamed network.

4 Better, Safer and More Personal Alternatives to Social Media

Face-to-face, person-to-person contact is always best, especially at the start, and there are so many ways and places to find that preferred “human network.”

This can be supplemented later by email contact and Web-based communications. Learn about a person by having them tell you, not reading it on some social network where everyone, and anyone can see it, misuse it, etc. There are literally dozens of ways to connect that are better than “Social Media” on the Web — here are 4:

• Contacts made through professional societies and their meetings. Consider having business cards just for these kinds of events. If your existing business card only has your company name and contact info, consider creating similar business cards that you can print yourself (templates here) that outline specific benefits that you offer to that particular audience.

• Networking through current and former colleagues, friends and neighbors. The people you know are like your very own “Sales Force.” So give them a little “tech sheet” on who you are and what you offer. Develop a Referral Guideline (Referral Guideline template) — this is a terrific piece of information that you can review with the people you network with. It will tell them who you are, what sets you apart, who your ideal client is and things these people might say that will trigger them to think of you.

• Join and participate in clubs. Network through clubs such as: Investment clubs, book clubs, sports fan groups, computer clubs, neighborhood organizations, Alumni and other college organizations, service and community organizations such as Rotary and your local Chambers.

• Conferences and round-tables that deal directly and indirectly with related topics to your work. Have something ready to hand out at these events. Perhaps a simple flyer or even a book or presentation (templates here) that you can create yourself.

And, when you are face to face, you’ll seldom find a 50-year old man representing himself as an 18-year old man — or woman or vice versa. The social fabric of a community and our country depends on these kinds of human connections.

The key is to be prepared both with your message, your involvement and with information about who you are and what you offer.

Other, More Profitable Mainstream Marketing Options

As I was putting this article together, Anita asked me what I would say to a Marketing Vice President who came to me and said that we needed a social media strategy such as using Twitter or Facebook. I’d say something like “You’ve completely lost it!” And then I’d start looking for a new VP of Marketing.

Here are other marketing options that are tangible and measurable, that I would want to see instead:

• Creative 3-dimensional direct mail. When you have a “finite” group of customers, meaning that you know who they are and there are fewer than 1000 companies or people, then direct mail is a terrific option. Segment your customers into smaller groups and then create a direct mail strategy that builds interest and relationship while communicating the specific benefits you offer.

• Create Selling Kits and tools that make it easier for sales people to communicate the benefits you offer. These might include customer quizzes or “tests” that help customers choose which options are best and help move the sales conversation along, or samples of actual products that customers and see, touch, taste or smell. If you have a product that lends itself to demonstrations, think about videos or interactive DVDs.

• Pre-Trade Show Program. By now, just about everyone is doing pre-trade show mailings to invite attendees to your exhibit. In what ways can you put a spin on that? Choose a theme for your exhibit early and then build interest, excitement and involvement with direct mail. Plan an event during or after each day at the show to give customers the opportunity to interact and learn in a less formal setting.

• Re-evaluate and optimize your Web site. The whole point of the Web is to constantly update and change content. I would want to see an analysis and benchmarking of our current Web use, traffic and ROI, and I would also like to see options for improvement. Update the copy to reflect current hot-buttons and keywords that customers will be searching for. Include an appropriate blog that builds manageable relationships

I recognize that the marketing landscape is changing. I love and embrace new technology — but for the sake of profitable business and not because it’s a shiny new toy. It’s easy to get caught up in complexity and we know that complexity increases costs and cuts profits.

So, you won’t see me adopting anything until I’m convinced that it is controlled, profitable and safe.

* * * * *

About the Author: John L. Mariotti is President and CEO of The Enterprise Group — Time-shared Executive Advisors. He was President of Huffy Bicycles, Group President of Rubbermaid Office Products Group, and now serves as a Director on several corporate boards. Mariotti has written eight business books and a novel. He has been a conference keynote speaker, a radio talk-show host, and a multi-national columnist for IndustryWeek, Management Centre Europe, the American Management Association, Fortune Small Business, Tiempo de Mercadeo, and a contributor to Business — The Ultimate Resource and the Encyclopedia of Health Care Management. His electronic newsletter THE ENTERPRISE is published weekly. His Web site is www.mariotti.net.

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By John L. Mariotti

1. CORPORATE EXODUS TOWARD BUSINESS OWNERSHIP CONTINUES: People who leave major corporations voluntarily or via downsizing will continue to see the value in starting their own small businesses or being self-employed specialists. Many return to the same companies, industries and/or professions as “consultants” or contract workers. While going it alone is not always easy or successful, when it is, it is far more satisfying.

• Tip: Uncover Rocks For New Opportunities – Contractors now perform many U.S. Department of Defense services. One of the best opportunity areas for the self-employed is in health care, the fastest growing source of jobs in the country. Hospitals, clinics and nursing homes need more help and use contract workers to keep costs variable and staffing flexible. Other small businesses often need support services too so don’t overlook them as “clients.”

2. U.S. GOVERNMENT STATISTICS CONTINUE TO UNDERCOUNT SMALL BUSINESS EMPLOYMENT: Government statistics fail to recognize the levels of small business employment. The U.S. Department of Labor’s Bureau of Labor Statistics won’t (or can’t) explain its flaws. This is a critical issue for small business owners since it influences access to benefits, distorts rules for self-funded retirement plans and complicates tax reporting.

• Tip: Seek Help to Save Money On Taxes — A good tax accountant is a must-have so that your small business does not leave money on the table. For instance, there are obscure provisions of the IRS code, like section 105, that provide very small firms with a tax-favored status on health related expenses. Consult your tax advisor to learn more or go to www.tasconline.com and click on AgriPlan/BIZPLAN.

3. BENEFITS CHALLENGE SMALL EMPLOYERS AND SELF-EMPLOYED: Traditional benefits (health care insurance, life insurance, disability and retirement/pension plans) continue to be a problem for small business. An employee normally relies on the employer’s human resource function to provide information, and many small businesses lack this expertise. This area used to be called “fringe benefits” but it is far from “fringe” as costs rise annually at double-digit rates with no relief in sight. Replacing this web of benefits is one of the largest challenges in small business employment today.

• Tip: Get Human Resources Expertise — Fortunately there are individuals starting small (one-person) consulting firms to help with matters like this. One example is Shared Time Human Resources Management. Health insurance plan providers have also recognized this need. The National Association for the Self-Employed offers a wide range of services — including health insurance plans. The U.S. Small Business Administration and local Chambers of Commerce are also rich resources for small business owners.

4. JOB MARKET CONTINUES TO TIGHTEN FOR SMALL EMPLOYERS: Recruiting and keeping people when there is fierce competition is a big challenge as the job market tightens up. The keys to retention are job satisfaction and competitive pay and benefits — in that order. Treat people as part of the business; make them partners in behavior (NOT in fact); give them insight into the business’ goals, progress and plans. The more involved they feel, the more likely they’ll stay.

• Tip: Find People Through Referrals – Online employment has become a huge area, but it doesn’t help much with the “sorting” of candidates. Test online job boards to see if they fit your needs, but remember that nothing replaces personal referrals as a source of finding people. There is less science involved in the selection, but there is greater knowledge about the person. Consider offering “rewards” (cash bonuses) to employees who bring prospects that get hired and stay.

5. LEGAL REQUIREMENTS CHALLENGE SMALL EMPLOYERS: Anti-discrimination provisions have grown substantially in recent years, limiting what can be asked, and what employment tests can be used. Impending changes in minimum wage laws (which vary by state) can be yet another challenge. Illegal immigrants are a particular problem in Border States and a handful of other states (Utah, Illinois and New York, for example).

• Tip: Educate Yourself to Know Which Laws Apply — Identify the laws that apply to your business — get help on this and/or refer to Web resources. Two good sources of information about small business employment law are Cornell University’s Labor Table and Management Help. Temp agencies can be good sources of employees, since agencies can screen the people professionally — but make sure they DO. If you do your own interviewing and testing of candidates, learn the applicable laws. You can find employment testing systems for sale on the Web, but before going there, read a general overview (PDF).

6. OFFICE ARRANGEMENTS CHALLENGE SMALL EMPLOYERS MORE: Workplaces are different today: more telecommuting, less camaraderie, less teamwork. A workplace that is in the home presents a special challenge, since it can create unexpected conflicts of work vs. home life — being “there,” but not really there. The wonder of modern telecommunications permits a workplace to be wherever a laptop with Wi-Fi or a powerful PDA/Cell phone combo exists. These create two special problems. One is a problem of focus on work in the midst of distractions. The other is the strong tendency to de-personalize work relationships.

• Tip: Stay Flexible, But Stay In “Touch” — One office solution for small businesses is a building that uses “hoteling” (sharing of offices with all the amenities — like renting a hotel room — computer hookups, telephones, answering & steno services, etc.). These get your small business out of the home and add professionalism but also add fixed overhead costs. One of the most insidious problems you may face is the absence of “colleagues” with whom to talk shop, discuss ideas, etc. If you were once part of a larger organization this becomes an issue very quickly. Replace organizational contact with memberships in business/professional organizations and social organizations.

7. SMALL BUSINESSES FACE THE CHALLENGE OF MAKING FACE-TO-FACE CONTACT: With more small businesses operating “virtually” with people scattered in different locations, recognize that there is no substitute for person-to-person, face-to-face interaction. Once the personal relationships are well established, technology makes staying in touch and informed easier than ever. But electronic communications make it too easy to be misunderstood or say things you’d never say to a person’s face.

• Tip: Observe The Do’s And Don’ts — Beware of technological isolation from people. Find a way and a place to get face-to-face. Experts repeatedly confirm that 70% of communication is non-verbal — the words don’t convey as much of the message as the tone of voice (phone is more personal than a computer) or the “body language” (no substitute for being there — video conferencing still doesn’t do it). Do meet people face to face as soon in a business relationship as possible, to establish those non-verbal communications. Don’t try to resolve tough disputes or negotiate tough issues by email — or even by telephone — if a face-to-face meeting is possible. Dispute resolution and arguments can escalate dangerously when using email or text messaging. Telephone is better. Live and in-person is best especially if there is a potential misunderstanding.

8. BUSINESS INSURANCE GETS MORE EXPENSIVE: One way to provide security for your employees is to insure your business, so that you can get back to business quickly should a disaster hit. Although this was a benign hurricane season in the Southeast U.S., insurers’ actuaries have long memories and last year’s disasters are still fresh in the financial statements. Small businesses especially will have difficulty insuring many typical risks like business interruption, products liability, disaster relief, and a plethora of personal injury types of claims.

• Tip: Use The Power Of Numbers – There is no easy solution to this problem other than to recognize it, join others with common needs and then shop aggressively. Joining with other small businesses (e.g., under a franchiser’s plans) improves the potential for finding insurance and/or getting better rates. If you are buying a business, assume any insurance possible from prior owners. This is almost always a better deal than starting over with no track record.

9. BABY BOOMERS PROVIDE A QUALIFIED TALENT POOL FOR SMALL BUSINESSES: The demographic impact of retiring Baby Boomers will be an overriding issue for employers of all sizes. Not only are Baby Boomers starting their own businesses, but they are being employed by small businesses, too.

• Tip: Fit The Need To The Person (Or Vice-Versa) — Many early retirees are willing to work for less than they used to earn, provided that the schedule is less demanding and/or more flexible — to accommodate their transition into “retirement” — if that ever comes. This permits a small business owner to employ several part-time, highly qualified, mature people and gain the equivalent of a full-time person (or several). There are cases where these early-out people did not get the kind of health insurance they expected, or none at all. While this must be carefully managed from the cost side, an employer who can provide them some kind of health insurance, even if it is (less costly) “catastrophic coverage” can gain a valuable hiring tool.

10. SMALL BUSINESS EMPLOYMENT GROWS AND ALSO DECLINES: There are many changes coming in job concentration by industry, and this presents opportunities and challenges for small businesses. On the positive side: A huge source of new job creation is health care and that means there are opportunities for small businesses to support the huge, growing health care/medical services industry. On the negative side: The housing downturn will impact U.S. jobs and many of these are in smaller businesses. Here is it critical for business owners to tighten-up the operations of their businesses, find additional sources of work/revenue and reduce fixed costs. As always, small businesses must manage cash flow vigilantly. This means planning ahead (in detail) and facing the reality of a dramatic pullback in the housing market.

• Tip: Follow the Growth Segments to Find Opportunities — The largest growth segments in the U.S. are service jobs, thus they present the best defense against any kind of downturn, as well as the source of new opportunities. Look for health-care or government related opportunities that are still growing and being funded. New businesses could focus on technological support for new diagnostic and treatment equipment. There are less sophisticated jobs, which will also grow, such as delivery and transportation services for the ill, the infirm, and the aged. In-home services to the elderly is a huge growth opportunity as nursing homes have limited appeal to many people who are mentally alert but only physically limited and wish to continue living in their own home and community. Also learn how to bid on government jobs and capitalize on any minority-related or special set-asides to gain an advantage.

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