Common Small Business Problems Hinder Success

Swot analysis

One of the advantages of consulting is that you get to see others’ mistakes. And learn from them. I have made more than my fair share of mistakes. Yet, I still am surprised by how often the basics underlying how you run your operations are the most common small business problems.

Good administrative processes will support and enhance your ability to grow and succeed. Set them up early and properly to be effective. Boring work, probably. Critical, yes!

Financial literacy is quite low in the US.

Whether you are a financial whiz or barely understand cash flow, you need effective financial processes in your business. You need a system that is right for your size and work. But you also need to understand and use it. Get basic training. Or hire someone to help you set up your own chart of accounts and understand what your system can do for your business. Then add help to maintain it as needed.

Your ability to manage your cash flow is critical to your success. And your tax returns are far easier with a good system. So is your planning!

Yet… recently it was a long-time business owner whose bank account was overdrawn before he realized he had not seen his outside book-keeper in months and his employee was not entering everything correctly. Last fall it was a CEO who had not made payroll on time – again; but thought employees should understand good intentions!

And don’t even ask me what happens to firms which do not pay employee tax withholding on time – think locked doors, seized bank accounts, personal assets at risk.

How are you hiring and paying for services your business needs?

Do you have employees? Independent contractors? Contractors or consultants? Interns?

Tax and labor laws contain a lot of traps for those who do not learn about the rules. Pay attention to what you are doing when you bring in the help you need. Often solopreneurs and small organizations hire extra help or expertise on an “as needed” basis. But you do need to be clear about the “how” and “which” among your options.

If you hire via a company which provides such services, it is usually a nice clean transaction – business to business.

But if you hire someone directly, you need to be sure to keep it legal.  And that is true even if you only hire the person for a few days or hours.

Check out this IRS guidance on hiring independent contractors. Be sure the help you hire, no matter what they call themselves, is working with you to ensure both of you are in the clear legally on your payments to them. Get a W-9 form. Keep good documentation.

Do you have employees? The federal and state governments are cracking down on proper classification and payment of employees. They are looking at whether the organization is trying to call them independent contractors instead of employees to avoid paying taxes and mandated benefits. They are checking out wages and hours and whether the organization is trying to treat employees as exempt from overtime laws when the work done is actually not exempt.

And when you have employees, you need records of their employment status and how it starts and ends. People claim unemployment often when they really are not eligible. But if you do not have a record of hiring and termination, whether the person resigned or was in a short-term contract or internship, you may be charged and your unemployment insurance (UI) rates may rise.

Want to hire an intern? Lots of small organizations think of interns as free help. Not so! Generally you have to pay interns, unless you are working with an educational institution where the internship is a part of a class or program. Note: non-profits can hire unpaid interns more easily. See this DOL guidance. I see organizations all the time that want an unpaid intern to work for them but violate these rules – and get into trouble. Back pay, taxes, and fines are common.

Violations of these laws are quite expensive. You will need a good lawyer, probably an HR consultant, and be subject to financial penalties.

And don’t get me started on business planning!

We all know we should – but do you actually have a plan? Does it include realistic information on your revenues and expenses? SWOT analysis? (Do you even know what SWOT means?) Do you have an assessment of your market and potential targets? Do you have goals for the short and medium term? And, if you have been in business awhile, when did you last update or re-do it?

I have seen a lot of small organizations get into trouble because they overdid hiring or outside assistance when a simple business plan would have helped them think more clearly.

Help is available from the Alexandria SBDC. Good online resources exist at the SBA. Special programs also exist for veterans, minorities, and women – so seek out all the support you need.

 

These ‘administrative basics’ are not what many of us want to do, we are too busy finding revenue. But they are worth your time and effort to learn and do correctly — so you can SUCCEED!

Patricia A. Frame is an experienced management consultant, HR executive, speaker, and author on human capital issues. She is known for her ability to address organizational goals and issues effectively and to create human resource management practices which support these goals without excessive administrivia. Patricia has advised executives and boards on a wide range of human capital and strategic planning issues. She has expertise in organization development, talent management, process restructuring, compensation, and training. She has worked with technology-based companies, government contractors, non-profits, associations, and retail operations. She advises small to mid-size organizations on ways to succeed and to help their employees thrive. Ms. Frame has given seminars for SBDC in recent years on the basic processes of HR management. Additionally, she generously provides one-to-one HR counseling once a month through Alexandria SBDC.

Area Resources to Help Your Business

Alexandria Small Business Development Center
Many of you know that the Alexandria SBDC is your local business resource to provide information on how to start, manage and grow your business. We are always looking to see what additional regional resources there are to help our clients and area entrepreneurs. George Mason University and Arlington Economic Development, along with several other entities, have teamed up to present three upcoming events that provide entrepreneurs the opportunity to hear from global thought leaders, learn cutting edge concepts and build their entrepreneurial networks and toolkit. To see what is happening at this spring’s “Venture Camp Entrepreneurship Speaker Series” at the Arlington George Mason University campus, go to the Events Calendar of Arlington Economic Development. This is an example of just one of many worthwhile programs you can find on Alexandria SBDC’s “Regional Workshop Schedule.” I encourage you to regularly review the Workshop Schedule to see what is available to help you or your employees learn new things, update skills or broaden your network. Go to Alexandria SBDC’s website and click on “Events.” As always, feel free to contact Alexandria SBDC with any of your business needs!


Patricia (Pat) L. Melton, Counselor

Pat Melton joined the Alexandria Small Business Development Center in 2006 as a Counselor focusing on providing business research to the center’s clients, after working with the Virginia Economic Development Partnership on its International Trade Team.  She then worked at Virginia’s Center for Innovative Technology helping northern Virginia technology companies grow.  Both organizations exposed her to numerous resources available to help Virginia businesses.

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Here’s the direct link to the embedded YouTube video: http://www.youtube.com/watch?v=nAJJrIoj47E

Virginia SBDC’s Small Town and Merchant Program Highlights Several Alexandria Retail Businesses

Independent retailers and restaurants are the heart and soul of small towns and main streets across Virginia. Successful retailers build vibrant downtown destinations, but they face unique challenges ranging from inventory control, advertising, merchandising and staffing, to big box competition. To help these vital small businesses, the Virginia SBDC network has developed STAMP.

Small Town and Merchant Program (STAMP)

Independent retailers and restaurants are the heart and soul of small towns and main streets across Virginia. STAMP is a comprehensive collection of workshops, hands-on initiatives, and resources designed to address the specific needs of main street retail and restaurant businesses.

Local organizations such as the Virginia Main Street program, chambers of commerce, retail and restaurant associations, and others work with STAMP to sponsor and deliver targeted and relevant guidance that business owners and managers can put to use immediately.

STAMP offers:

  • Individual, Comprehensive Retail Business Checkup and Restaurant Check-up
  • On-site business visits
  • Seminars held before or after hours
  • Complete confidentiality

This is a great video detailing the program:

Small Town & Merchant Program (STAMP)

For more information about STAMP, feel free to reach out to Alexandria Small Business Development Center today!

Risk Avoidance: Risky for Small Business Investors

Risk
Risk (Photo credit: The Fayj)

When I first joined Wachovia in 2008 (you may know us as Wells Fargo), one of the first things I was told was that “Sometimes you buy stocks when they are down so you won’t get tempted to buy them when they go up.” I feel it was great advice. It tells me there are subtle risks in stocks that are just as real as the obvious ones.

Academics define risk in terms of volatility. Most of the Small Business investors I know do not worry that the stocks that they own will go up too quickly; that would be a wonderful feeling! They worry that what they own will go down in price and that they will lose money; pretty normal if you ask me. Losing money is painful. It’s only right that we all want to avoid doing it. That being said, I am not 100% sure that this risk should be avoided at all costs.

Overtime, we have been shown that stocks seem to defy the rules of supply and demand. In most cases, higher prices mean less demand and lower prices mean more demand, which is not always true in the capital markets. Sometimes when an asset appreciates, there is a belief in further appreciate of that asset in those who have not participated in the rise. Those who have not bought in experience remorse. The feeling can exist even more if that rising asset was avoided because of fears of losing money. In addition, an alternative asset was purchased as a result of expected lower risk when unfortunately little or no return was given to its holder causing even more remorse.

It can be painful not to own stocks as they are going up. Investors feel they have “missed the boat,” which can cause one to enter the market at higher prices and set the stage for future losses. I believe that investors should be risk averse, but I also believe that they should be aware of the bucket of risks that exist. I feel that the future is risky by nature. One cannot avoid risk but one can manage it. A diversified portfolio may mean that you are never entirely right, but guess what? The chances of you being entirely wrong are not so great. When was the last time you rode on a Ferris wheel. It would be stupid to invest all of your assets on one bucket. What would be smart is to divide those assets into several buckets in that Ferris wheel. Should one bucket tip, you have others to stabilize that one bucket’s loss. If you ask me, 100% cash portfolio can cause almost as much trouble as one that is 100% common stocks.

In my opinion, there is still room for appreciation. The world is still far from perfect. The perceived risks of stock prices are still widely felt. Is the least understood risk the risk of no equity exposure at all?

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JASON FUCHS is a financial advisor for Wells Fargo Advisors in the Alexandria, Virginia area and can offer you a wide range of financial and investment services.

 

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