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If you’re a small business owner, chances are you’ve purchased a surety bond. If you’re just getting started on the journey of small business ownership, it’s likely you’ll need to purchase a surety bond in the near future. Either way, you should know exactly what a surety bond is, why you’re buying one, and what can happen if you aren’t bonded.

First, you should understand how surety bonds work. All surety bonds are made of three parts:

  1. Principal - This is you or whoever is buying the bond. You’re guaranteeing your business’s future performance.
  2. Obligee - This is the entity requiring the bond, typically the government. They want to guarantee your business will follow all rules and regulations they’ve set.
  3. Surety - The surety is the insurance company that backs the bond and provides the line of credit should a claim be filed and proven against the surety.

So what happens when your business isn’t bonded? A lot of the time, potential customers won’t even give you a second look. Not being bonded often indicates unreliability, especially if you’re a contractor or car dealer. Getting bonded can be a simple, pain-free process, and knowing the basics puts you miles ahead of the competition.

If you’re not bonded, you’re going to face challenges. First and foremost, you could be breaking the law. Many businesses are required by law to purchase surety bonds and often business licenses won’t be issued without proof that the would-be owner has the bond. By checking to see what your state requires, you’ll save yourself a lot of legal trouble. Then, if you fail to adhere to your industry’s laws and regulations in any way, you might end up being sued because the claimant has no surety bond to file a claim against. And again, you may already be breaking the law by not having a surety bond...it can be an ugly cycle.

You may have heard about what happened with nail salons in New York City recently. Many of the city’s over 7,000 nail salons were revealed to be severely mistreating their employees in a two-part series published in the New York Times. They are underpaid, overworked, and exposed to dangerous fumes and chemicals for hours every day. Many employees are often forced to pay fees before they even begin working with salon owners claiming such practices as means for covering training costs for inexperienced workers. In some cases, starting pay was as little as $10 a day.

If those businesses had been required to be bonded, the employees could have filed claims against the bonds and been compensated for their unpaid hours. Fortunately, new regulations are being implemented that will require nail salons to purchase wage bonds guaranteeing that employees will be paid a fair wage. New York took it a step further and made operating an unlicensed nail salon a misdemeanor, punishable by a maximum $2,500 fine and up to six months of jail time. The law was passed on June 18, 2015.

If you’re a contractor, you’re going to deal with bonds quite often. Contractor bonds, which can vary by city, ensure that contractors are adhering to all applicable ordinances and are usually required to become licensed. Then there are several types of construction bonds you might need to get throughout the project, like a maintenance bond, which guarantees against defective materials and workmanship for a certain period of time after the work is completed.

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Typically contractor licenses require being bonded. A smart consumer is going to thoroughly research their contractor before signing a contract and they’ll pass over you if your license has lapsed or your bond has expired or defaulted. Contracting nightmares are a dime a dozen and horror stories have made clients much more wary of who they trust to take on something as important as a home remodel. If you’re already bonded and knowledgeable about which bonds you may need as the project continues, you’re going to stand out to potential clients as the trustworthy, reliable choice.

So how do you get bonded? Just call a surety bond provider and they’ll get you a quote. If you know what bond type you need, great! If not, the surety provider will be able to help you determine what you need, or you can take a look at this map. Click on your state to see what bonds are offered. Usually you can get a quote within one or two business days and your bond a few days after that.

It’s important that your business is operating within the law and fulfilling its licensing requirements. It’s also valuable for you, as a business owner, to know exactly why you’re purchasing a bond and why your business needs it. Customers are savvier than ever and researching businesses they patronize is easier than ever, so make it easy for them to choose you: know your licensing requirements, get bonded, and get down to business.

He_is_piling_up_his_Thrift_Stamps-Are_you-_Buy_Thrift_Stamps_LCCN00652894.tifThe road to successful entrepreneurship can be a long and rocky one. Therefore when your business is in the start-up phase it is important to ensure financial efficiency is a prime consideration in any decision you make.

The five steps outlined below will make sure your business is built on firm foundations.

1. Choice of Legal Entity

This decision will have repercussions on your tax return, on the records you need to keep and on the amount of personal financial risk you are exposed to. For any person considering working as a contractor you will need to weigh up the benefits of a limited company versus an umbrella company.

For other start-ups there will be the choice between the sole trader route, various types of partnership or a limited company. If you choose the latter you will need to register with Companies House (ed. note: US businesses should probably register elsewhere 😉 ) and file an annual return. However, it will give you more protection with regards to your personal assets.

2. Insurance Protection

When you are a new business it is easy to forget about making sure you protect yourself against unexpected events. Legal claims brought against you, damage or loss to property and insufficient cover for your employees can literally wipe out your business if you don’t have ample insurance cover in place. Public liability, employers’ liability, property insurance and professional indemnity are the minimum cover you should seek. As your company grows you may also want to consider key person insurance and additional life assurance and private medical insurance for you and any staff.

Once these five key areas have been addressed you can move forward in confidence. You will know you have established your start-up in the most financially efficient way to take you forward into future business success.

3. Protect Your Data

You will amass a large amount of data within your business in a relatively short time. This can be both electronic data and hard copies. It can also relate both to your own business and to those of clients, including sensitive personal and financial information.

The security of your electronic data ties in with the point above about keeping your systems running smoothly. As well as troubleshooting problems as they arise you also need to think long term and to put the following processes in place: install and regularly update virus protection software to guard against malware and the malicious loss of sensitive data; protect systems and applications with complex passwords and change them frequently; and finally back-up all data on a daily basis and keep these backups secure and off-site in line with best disaster recovery practice.

4. Taxation and Accounting Choices

Excellent record keeping within your business will ensure you are ready to make annual returns and remain as tax efficient as possible. If accountancy is not one of your areas of expertise at least familiarize yourself with the basics. Even if you outsource bookkeeping and payroll ultimately it is your responsibility, and not your accountants, to make sure records and annual returns are accurate.

However, expert advice can help to ensure you claim all the business expenses you are entitled to. This can make a substantial difference to whether you are in profit, and by how much, at the end of your first year in business.

5. Keep Your Systems Running

In today’s technology driven workplace, most businesses cannot function without their computers, laptops and mobile phones. Ensuring your network, or even your own personal computer, has relatively little downtime is essential to the financial viability of your business. If you run into small computer issues you can often solve them yourself by searching for computer tips to help you get back up and running. If the issue is more serious it can be more time and money efficient to seek professional help as soon as possible.

-or-

If you need help, ask for it

This guest post comes from SBT's favorite accountant, Harold Littlejohn. Why is he our favorite? Read on to find out.

-Seth

IMG_9565 4x4 sq retroNate and Seth at SmallBizTriage.com are extremely busy guys. So busy that when they converted their Washington-based Smallbiztriage.com business to an LLC (Limited Liability Company) in 2013, they must have missed opening a “snail mail” from Uncle Sam (Tip: Never open an email from the IRS…..they don’t contact taxpayers via email) that would have reminded them that the filing of their Form 1065 LLC partnership tax return for the tax year 2013 was due on April 15th of 2014.

Lo and behold, life went on, business went real well for Nate and Seth, and April 15th came and went without their 1065 being filed.

This is where my years of tax experience shine! Thanks to a little-known IRS rule, if you or your business has a clean record with no late filing demerits over the most recent three years, they will forgive a late filing penalty. But you must request it in writing.

So when SmallBizTriage generated a hefty late filing penalty in their first year of business, I immediately banged out a letter to beg, on their behalf, the King (read IRS) for pardon. But I was worried…..this has worked for my clients in the past, but they had track records of three years of timely filing, but SBT didn’t.

So imagine my delight when I received an email from Nate that Uncle Sam had forgiven them and removed their late filing penalty!

You see, even the giant behemoth known as the IRS has a heart in there somewhere after all!

To be frank, the IRS's lifeblood, or their “business model” if you can call it that, does depend on “customers,” I mean taxpayers, filing returns and paying the tax that is due. Think of it this way….they have a customer filing every year and paying taxes. That customer misses a deadline one year.

With no forgiveness, that taxpayer/customer might be afraid to file late and could slip into the “non-filer” category that is the thorn in the side of the IRS's well-oiled revenue machine.

So by offering forgiveness every few years, they keep the money flowing in and filing goes on for another several years and hopefully the taxpayer will never forget to file on time again.

Many persons and even professionals don’t know of this rule. Wait….if a professional is perfect, his clients never miss a deadline, so he wouldn’t NEED this forgiveness exception. Ha!

In my experience, there's a lot that sharp businesspeople like Nate and Seth don't know about tax rules and regulations, so here's a few pointers to help you out during the journey you have chosen as a small business owner:

You can’t be expected to know your own business PLUS all these tax rules. So contact me for some help this coming tax season. I might save you a lot of money, and isn’t that half the battle of being in business?

And if you have already made the big boo-boo and you are late, contact me with the tax problem, as I am human and I have experience with forgiveness of the occasional late filing penalty!

stroheim-typewriterThis week's guest post is a good follow up to last week's. You ready to be your own boss? Here's what Hannah Corbett has to say about it. For SBT's perspective and passionate rebuttal, see also "How to Start Your Business the Wright Way" and "Don't Borrow; Sell". Think those articles conflict with some of the advice put forward here? You're darn tootin' they do. Why else would I publish this piece, if not for an alternative to our usual contrarian tirades?

How are you going to get your business off the ground? -Seth-

Starting and running your own business, for many, is living the dream. For others, it is still just that: a dream. There’s a lot of idealism surrounding startup business and entrepreneurship: “dream big”, “shoot for the stars”, etc, etc, etc. But the truth is, “dreaming big” never really got anyone anywhere – good old-fashioned hard work did.

There are a million and one reasons why potential entrepreneurs ‘can’t’ breakaway from their nine-to-fives and go solo – the main one being that it’s unaffordable. While, yes, you probably will need at least some money behind you in order to start up a brand new business, there’s no reason why raising this money is unachievable.

It is possible to start a business with little initial funding – it’s not easy, but it’s possible. You have to be strict, stringent, and resourceful at all times. Don’t let this put you off, though, starting your own successful and affordable business is absolutely achievable – you just have to get into the right mind set. Take a look at some of the following advice on how you can start a business on a budget, and see for yourself.

Budget

Budget gets its own section as it’s one of the most important foundations of any successful business. Everything little bit of your business that you build will need a budget as a platform to stand on. Even elements that may end up being free – such as free advertising for example – still need to be considered by the budget before being executed.

When it comes to your business’s budget, the usual advice is to spend time on your budget, consider all possibilities, be realistic – but really, the most important thing is that you stick to it. It doesn’t matter if your budget is as little as £1,000 – you need to spend that carefully and tactically. Don’t stray either way by so much as a penny – if you can’t stick to your budgeting plans, then you’re setting yourself up for failure.

Initial Funding

Once you’ve got the right budget in place, and you’ve pledged to follow it religiously, it’s time to move on to the question of how you raise initial funds to kick start your business. Traditional methods, such as getting a bank loan or using credit cards, can often be the most expensive in the long run, so consider some of the following options, too.

Crowdfunding – Crowdfunding is a great way to raise funds through an equity scheme, and there are a huge range of websites that you can do this through (Indiegogo, Crowdfunder, and Kickstarter just to name a few). There are a lot of benefits to crowdfunding, but it can also be risky. For example, with some sites, you have to raise 100% of your target in order to get any of the money. So, if you reached 99.99%, well, you wouldn’t get anything. It can also be massively successful, though. To use Brew Dog as an example again, they created their own equity scheme, called Equity for Punks, to fund their business. Check out this guide for more information on crowdfunding, and decide if it’s right for you.

Accelerator This may not be the best option for everyone, but it’s an option worth considering nonetheless. A startup accelerator is an intensive programme designed to get startups off the ground, quick. If you’re well prepared and suitable dedicated, an accelerator could work for your business. Find out more about startup accelerators here.

Partners You don’t have to go into business alone. Going into business with one other person doubles the amount of initial investment money (and doubles the amount of people seeking additional investment). Going into business with three people triples it, and so on and so forth. You might not initially be willing to share your big idea with others, but sharing the workload and responsibilities that come with having a partner could be hugely beneficial down the line.

Friends and family – This is hugely underappreciated by budding entrepreneurs, as many feel embarrassed asking family and friends for help. But, honestly, you can’t be shy. You have to be bold. Maybe your Great Aunt Nellie is a millionaire, or your best friend just got a great bonus at work – ask them if they want to invest it in your business. Worst case scenario is that they just say no, and best case is that your business gets some funding.

Bootstrapping This is, arguably, one of the cheapest ways to start a business, as it requires no external investment whatsoever. Bootstrapping involves using the skill set you already have, and finding a market for services you could provide with those skills. It’s a great way of getting some money under your belt to invest in scaling up your current services, or use as a startup fund for another business idea.

This list is certainly not exhaustive – there are many other ways to fund a startup. If you want to do this in the most cost-effective way possible, it may mean going down unusual funding routes, or combining multiple funding options together to raise your target amount.

Next Steps

Product – For a small startup, you don’t need the ‘big’ idea, so much as you need the ‘niche’ idea. Shooting for the stars is not always wise; when it comes to starting a business, it’s better to take baby steps – well planned and thought out baby steps – and work your way up to bigger things over time. Having a niche product idea is a good way to go about this, as it’s likely there will be less competition in your corner of the market, and (hopefully) there will already be a defined audience and demand. It can be a much easier (and cheaper) win than jumping, head-first, into competition with the bigger companies and corporations.

Marketing – You’re really going to have to think outside of the box with your marketing, especially to keep costs down. As an example, consider the craft beer company, Brew Dog. For this small business, thinking outside of the box is an understatement – they play entirely by their own rules. Their preferred marketing techniques are brave, bold and edgy (see some examples here), which is why they make such an impact compared to other craft ale companies. In an ideal world, you would also be doing all marketing yourself to keep costs down, as paying an experienced marketing expert will be costly.

Saving Money

It’s all good and well starting a company with very little money, but it’s equally as imperative that you keep costs to a minimum once your business is up and running. Remember that reducing outgoing costs effectively boosts your bottom line.

Keep overheads down This is important as it’s all too easy to find that you’re spending a lot of money on rent and bills each month. To start off with, don’t hire - learn to do the job yourself, or get an apprentice or work experience volunteer on board. You could always get a freelancer/contractor in if you have to. Also, you may not need to rent premises initially. Consider setting up in your spare room or garage first. You can move to proper premises as and when you need to. This keeps energy bills and insurance down, too.

Upfront payments – asking your customers to pay you upfront – or half upfront at the very least – means that your costs are always covered in advance, so there’s no way you can be out of pocket.

Second hand Don’t be tempted to splash out on the latest tech or most chic furniture – it’s an unnecessary cost for something you don’t really need. Even customer facing businesses can make the most of second hand furniture and equipment without looking tacky or scruffy. You can find virtually everything you need for your business second hand, or even free on sites like Freecycle.

Always remember:

Once you’ve got yourself into the frugal business mind set, planned the cheapest funding for your business, as well as thought out how to keep day to day running costs to a minimum, there are a few more things that you should always keep in mind in order to keep your startup cheap.

Play it safe – There is nothing wrong with going for easy wins or guaranteed returns to begin with. When your company is bigger and more stable, then you start to take risks. But for the time being, it you do have to take risks, take calculated risks.

Perception is everything – Nobody needs to know that you run your business from your spare room, or that it was funded entirely by your Great Aunt Nellie. Even if this is true for you, there’s no reason that you can’t project your business to be bigger and better than it currently is. Make it what you want it to be, because one day, it might actually be that big, better business.

Sweat equity – Dreaming big does not a business make – working hard does. You cannot be afraid to be hands on and dedicate everything to making this startup work. You are almost guaranteed to fail if you are lazy or work-shy. You have to actively make your dreams a reality, so get stuck in.

To conclude…

The key to starting a business cheaply is to have a little smarts about you, and a lot of dedication. Address the foundations of your startup, your initial fundraising techniques, as well as the proposed daily operations of your business to make sure that all three embody the strict and thrifty mind-set you need to make your business work.

You don’t have to be wealthy to start a business, but you have to have adopt and live the characteristic resourcefulness, prudence and commitment of the entrepreneurial mind-set.

So you are a small business, it is just you and one or two employees.

Great! You are in a better position than most large businesses to market your business, grow your business and adapt to changes in your marketplace.

Customers want to do business with someone they know, like and trust.  They want to know who they are going to call if things do not go their way.  So use that to you advantage and get growing.

Why would people choose a one man/women show over a big company?

  1. The Buck Stops Here - Look problems arise and how you handle the problem, with speed and resolve is just as important as avoiding the problem in the first place.  As a small business customers have the feeling they can pick up the phone and get their issue resolved ASAP.
  2. One on one connection - When clients/customers see your face in marketing material they immediately begin to have a one on one connection to you.  I have rental properties and have my face on my website.  On numerous occasions I have met potential tenants at showings and have people immediately say "I recognize you from your videos (or website)".  This helps put them at ease, make them more comfortable and advance our relationship.
  3. Better Service - If is often expected that if the owner is doing the work you will get the job done right.  After all they are the expert.
  4. Better pricing - Customers expect better pricing since small businesses often have less overhead.

So Let Them Know You Are Small

hot-water-heater-york-pa2Put your face out there, put your face on your marketing materials, put your face on your website, put your face in your videos. You are the expert in your field and make sure people know that.  

Not "We" but "I"

When writing the content of your website or marketing materials talk about how "you" are going to help the client/customer not "we".  And make sure it is consistent throughout all of the text.

Offer your personal cell number - If you are going to give your cell number out anyway, proudly display it on your website or printed materials.  You could say "If you a problem call my cell at 717-xxx-xxxx and I will be out right away.”  Hey if you do the job right nobody will be calling you at off hours anyway.

Make it About YOU -

Make your about page about you, about your background. What do you like to do?  What are your values?  

Look you are not going to appeal to all customers.  If potential customers make it to your about page they are getting serious about using your services.  This is your time to connect with them.  If you have an interesting back story let it be known.  Where did you go to high school or to college?  Did you grow up in the area?  Have lived in various parts of the world? Help people to find the way to connect with you.

Put on the printed marketing materials.  

If you have printed marketing materials, carry the message over to your printed marketing.  Including your photo and pictures of you in action performing the services your offer.  

Use Smallness To See New Opportunities

Listen for customer pain points -  As you are working one on one with customers everyday listen to them speak, What words are they using to communicate their problems or pain to you?  What words are they using after your job is complete.  Use these words in seeking out new customers.  

Avoid using technical terms you would use with counterparts in your industry but rather speak to your customers level.

Decisions makers in large businesses are often far removed from the one on one customer interaction, that overtime they lose sight of how to communicate to potential customers.

Seize the day - As the markets begin to change and new opportunities open up, when you are on the front lines, you can see the change.  You and your business can act ASAP.  The business world is littered with past businesses who did not recognize changes in their industries and either refused to adapt of did not adapt quickly enough to make the change.

Communicate, Listen, Act

Communicate to your potential customers you are the expert to call and when there is a problem the buck stops with you.  Listen to you customers for ways to grow your business.  Take that information and act on it to stay ahead of of the competition and grow your business.

 

Editor's Note: No Doctor Who references in this post, I'm afraid, but this guest post from Holly Chavez goes above and beyond when it comes to thoroughly examining the question at hand. Enjoy! -Seth-

Blake_Dante_Hell_XXVI_UlissescroppedIf you’ve been weighing whether outsourcing varying components of your business can contribute to its success, you’ll want to take a number of factors into consideration first. That’s a vital first step because when it is implemented correctly, you can watch your company expand and save money. There are also other reasons for the advantages that go well beyond financial means.

My First Experience with the Concept of Outsourcing

I was a lowly college student busting my tail working full-time and going to school part-time when I first heard the buzz about outsourcing back in the early 90’s. It was starting to catch traction in the news and my professors made the information about this business practice a part of their lesson plans, especially in my business courses. Outsourcing was particularly demonized at the time, and the media often portrayed it in a purely negative light. I was sitting in my business class one day when one of my fellow students asked the teacher why we were sending so many jobs overseas. The question was very pointed, and I could tell that my fellow student felt that it was definitely a negative trend by the way they spoke about it.

The professor listened to him politely, and then turned to the rest of the class. He asked us to look in our clothing and find one example of a hat, shoes, shirts, and pants…anything that indicated that our clothes had been made in the USA. We found several examples of Mexico, the Philippines, India and China on the labels within, but there wasn’t a single stitch of clothing that had been made in America (and it was a very big class!). The teacher then told us our term paper would be about outsourcing, and the many benefits it brings to business owners. “Have fun!” he said. “Thanks, I thought sarcastically.”

I figured that the term paper would be a boring topic on a business trend that I didn’t agree with. After all, my mother had lost her job in a textile mill due to outsourcing. So with much reservation and lack of appreciation toward my professor and the student that got his wheels turning, I began my work. However, the paper I produced that semester opened my eyes and subjected me to my first realization that there is a strong media bias that influences much of what we read and see on television, and there are actually many benefits and advantages to business outsourcing.

To illustrate, there were plenty of stories in the news about how we were losing jobs to outsourcing and NAFTA – who can forget Ross Perot’s famous statement during his 1992 presidential campaign proclaiming that NAFTA (North American Free Trade Agreement) would create a “giant sucking sound” of jobs going to Mexico where labor is much cheaper if the deal didn’t work both ways?

Lifting the Veil—Outsourcing Has Many Benefits

What we know from fast forwarding 20 years after NAFTA became a reality, was that Perot was wrong, and mainly in his assertion that it would drag our economy down. It has actually been a boon to the U.S. economy, along with other outsourcing and offshoring ventures. According to economist Gary Hufbauer, NAFTA alone has created two million jobs annually since 1994.

Nevertheless, the negativity of all the jobs lost to NAFTA and other outsourcing and offshoring deals were presented in the news at that time for the most part.

Unfortunately, none of the benefits they brought in return were mentioned much in the news, especially the long-term predictions for massive job creation. In all fairness to the media outlets, this concept, much like globalization, were in its infancy in the 90’s. The research for the paper I wrote that semester revealed to me that outsourcing had many benefits: it was often better for the environment, allowed more company profitability, and even long-term job growth in many instances. I saw many of these facets in one of my first paying jobs I had while I worked my way through college, also.

Operations That Should Give Outsourcing a Try

One of the first industries that went overseas were lower skilled industries, and many of them being the textile manufacturing business. My first internship in college was at a carpet mill in the Southeast, and it was a lesson in why many of these industries are sent overseas. The process is very simple, and it uses a lot of resources; additionally, they often pollute the water and air as byproducts of the process of making the carpet. The whole town smelled like a wet dog most of the time, and most of that industry probably would have been shipped overseas, like the rest of textile business, if the finished product wasn’t so big and bulky. Therefore, rendering it an expensive and nightmarish logistic option of bringing it back to the states, once manufactured outside of the country.

The carpet industry started seeing the cracks of remaining financially viable in the late 1990’s and early 2000’s. They were hit particularly hard by the housing market crash, and they began to close and consolidate many of their operations soon afterwards. Many of them were shuttled or downsized by the mid-2000’s. Those that stayed open often suffered increasing instances of injuries, and even some fatalities, as safety oversight was scaled back and workers were often rushed to fulfill quotas. Before I left, they were also suffering from and receiving high-level criticism about the amount of water they used during their operations.

DKC Show Highlights Fashion Outsourcing

A few weeks ago I was involved in the support of public relations and media giant, DKC. They recently had a red carpet event where they were promoting brand recognition for Aéropostale. It was an exciting event, but what was most interesting about the venue, though, was how even a glitzy event such as that can remind you of how valuable that outsourcing is and how it is all around us.

To explain, one of the many services that DKC provides includes facilitating all aspects to build popular brands for the fashion industry. They often hire actresses and models to put a youthful face on hot fashion brands such as Aéropostale. As actresses Vanessa Hudgens and Shay Mitchell came out on the red carpet to give good face to the flashing lights and lend their celebrity clout to boost the image of Aéropostale, I was reminded of my professor asking us to look within our clothing items for a ‘Made in America’ label. And sure enough, Aéropostale is a prime example of company that manufactures clothing outside of the U.S. Their clothing is actually made in a factory in Sri Lanka.

Your first thought may be that of the student that set the mood for the business class term paper we discussed earlier -- something along the lines of, “Wow, the loss of jobs by doing it in another country.” However, not only is clothing outsourcing beneficial, the benefits in these cases are two-fold. There are direct benefits that have an immediate impact--such as reduced capital investment, better quality of the manufactured product and lower costs. Then there are indirect benefits on processes that are kept in house. Indirect benefits are more hidden and have a slow and subtle effect on a company’s profit margin. They can include better resource development, stimulating analysis and converting sluggish functional areas into more dynamic ones.

Should you feel Guilty about Outsourcing?

That question poses a moral argument to some folks that I often encounter while I have worked over the years. At times I was tasked as an industrial engineers to help businesses improve their performance and profitability. Sometimes re-engineering could fix a process that was barely hobbling along. For instance, the solution is often very simple in manufacturing facilities, such as ensuring operations to be in sequential order, thereby eliminating backward loops in the process. Other fixes involved eliminating wait times or moving workstations in sequential operations closer to each other.

However, there were often cases where it was necessary to implement outsourcing to allow the company to improve their bottom line. One instance was as simple as a little more organization, and the scenario involved a small warehousing and distribution company I worked for. After observing the storage process in the warehouse, it was clear that the disorganization and lack of visuals was hindering the worker’s capability to pick and ship merchandise. The issue was seen in all ten of their warehouses.

After the warehouses were organized and made visual, they found they only needed to have six warehouses vs. ten. The employees in the four warehouses that were closed were laid off, and it was one of the first instances in my career that I was in discussion with business owners to keep things ‘hush hush’ so as not to let it get out to the employees that the layoff was coming as we worked to put the plan in action. Did I feel bad? Not really. Does this make me or others involved with consolidation and outsourcing labor and other resources to another facility heartless? No. It’s a hard decision for anyone, but you really have to look at it from a systems perspective.

The Aftermath of the Warehouse Case

There have been times that I have been asked by business owners (and even some other industrial engineers) if the outsourcing bothers me. My answer is resoundingly, NO. You can’t localize outsourcing that way – you have to look at the big picture. Of course the employees lost their jobs in the four warehouses we discussed earlier, but if it had continued the way it was, those facilities would have closed anyway and damaged the profitability of the rest of the company.

Interestingly enough, it’s been seven years since the warehouse closures, and the company has been thriving in a sluggish economy. The company incorporated the best practices outlined to make their warehouse storage systems more organized and visual going forward, and the customers stay satisfied because they no longer are told that goods are missing or their shipment will be delayed.

The center also experienced growth from their original ten warehouse to twelve, with plans to open two more next year. Outsourcing such as this offers huge benefits, especially small businesses that find it a little harder to compete than a huge corporation would. Here are a few of the advantages that outsourcing brings to your business that can help you with your decision.

Focusing on Core Business Duties

Periods of rapid growth can stretch a company greatly beyond their limits, especially in the human resource and financial departments of a business. If a small businesses owner or entrepreneur needed any convincing that these activities should be outsourced, they should understand that 40 percent of these are non-revenue-generating activities. From payroll and human resource management to benefits and compensation, entrepreneurs can spend up to 40 percent of their precious day engaged in these necessary but time-sucking tasks.

This type of event can allow these important departments to become overwhelmed and swamped with all sorts of jobs. Instead of focusing on what they were hired to do, they are now in charge of a sea of endless tasks that can be difficult to accomplish in a timely manner.

However, outsourcing that additional work can allow your team members to focus on the core duties. This can include payroll, tax returns, profit and loss, employee review updates and staying within the parameters of the human resource laws.

Outsourcing Provides Cost-Efficient Advantages

Office functions that require additional training may be needed in a company. Whether you have to keep up with new rules and regulations pertaining to payroll laws or your medical billing would like to accept new insurance programs, the costs can add up and take a toll on your business.

On the other hand, outsourcing the duties to a facility that specializes in this activity can be cost-efficient to your company. It can also save your business time and money when all they have to do is focus on this specific task and make sure that it’s done extremely well.

Considering the Human Component Factors

While outsourcing can prove beneficial, you also have to take into account the human aspect of it. Business owners and corporate leaders may have to tackle tough decisions related to outsourcing. While it could help to keep your company from going under, consolidating the jobs and duties under one roof can eliminate jobs.

For instance, look at the military bases that have made ghost towns out of the cities and towns where military personnel and their families once supported a booming industry and local economy. Many Base Realignment and Closures slowed down areas that were thriving, but the consolidation made the military stronger as needless spending was cut out. Businesses operate much the same way and with the same methodology in order to stay viable.

Nevertheless, anyone with a heart and soul would find it difficult to put any number of people out of a job, even if it allowed the business to run more efficiently. Separating heart from the real world is difficult to do, but it can help when you hire the right outsourcing company and keep in mind the many benefits that outsourcing brings to the table.

The Seasonal Flexibility is an Added Benefit

If a company has significant growth at different times of the year, hiring a permanent employee may be a waste of time and money. While they can prove beneficial during the busy times, you may find them a hindrance when your business experiences a drought.

For example, an accounting company that is understaffed during the busy tax season may find it an advantage to outsource temporary employees during the hectic times of the year. Once the demand has lessened, you can release them from their duties.

Outsourcing Risk Management and Company Continuity

Going through high rates of employee turnover can be very disruptive to a business. Whether they are on company medical leave or your staff leaves for new jobs, training can be an added burden. This kind of incident can be especially crippling if your employee turnover is high. However, outsourcing allows your work to be completed in a consistent manner without disruptions.

Better Operations Management is Key

Operations that have lengthy processing times and rely heavily on experienced and skilled individuals when performing them can be particularly taxing on a business budget and schedule.

Also, when a company works with chemicals and toxins, it can cost a company a mint complying with regulations and adhering to strict guidelines.

Many strict laws and regulations are designed to protect the environment. Businesses that strive to meet these requirements incur great costs and time in the process. However, finding experts in the field through outsourcing can help with the adverse impact to the safety of the environment. It can also ensure that the proper measures are being followed in regards to working with chemicals and their proper disposal. Letting someone else manage this part of the process cuts out excessive lead times, saves money and is often a more eco-friendly choice.

I saw this in a company I worked at that refurbishes turbine blades for Siemens and GE. Their overhaul and repair process had very long lead-times and was very complex. One of the processing times for the assemblies was even made longer and more expensive because of the chemicals used to clean the blades. Safety regulations in New York where the blades were cleaned and refurbished were very expensive, and the whole approval process was very lengthy. The solution was to outsource the operations to a company in Mexico that had an acid bath that was suited for cleaning the blades. Even considering shipping time, the process lead-time was lessened by two weeks when the blades were sent to Mexico for processing.

The Right Outsourcing Company Helps the Transition

Whether you outsource your payroll or accounting duties, you’ll know that the right outsourcing company can ensure that the work outsourced will get done when you need it most. It can often be a task to outsource many business services, especially since many companies have provided these services for decades.

Once that it is done, though, many outsourcing operations are very successful and competent at what they do. This, in turn, leaves you the ability to be able to focus your resources on your core competencies and reap the many benefits of outsourcing.

Selecting the Right Outsourcing Company

Many business owners are hesitant to throw their hat into the outsourcing arena. It's definitely a big step, and even though there are benefits as outlined here, it’s still difficult to know how to select the right outsourcing company. It’s such a massive step, so what do I do. The first thing that comes to mind about this that I tell my clients when I consult is kind of silly, but fitting: How do you eat an elephant?

Well, you eat an elephant one bite at a time. The same with choosing the right outsourcing company. You do it in small increments and you do it carefully. After all, it’s your business, and you don’t want to negatively impact it by choosing a poor outsourcing solution.

Outsourcing isn’t always sending work to the ‘wild blue yonder,’ either. Some outsourcing is sent to companies within the U.S. The most recent one I was involved in provided outsourcing the warehouse operations for a medical manufacturing company. The work involved outsourcing the storage of their completed displays and spare parts at a 4PL company warehouse and distribution center. Here’s what we did to implement a successful outsourcing venture for them.

Laying the Groundwork

Whenever you outsource to another company you are choosing something akin to a business partner, and you will want to protect your viability and good reputation by choosing a company that is reputable and shares your core values. You’ll want them to have the same (or very similar) business practices and devotion to success.

In the case of the 4PL that was ultimately chosen to be the supplier for the medical company, there was a process initiated for selection. It’s recommended that you pursue a similar path in rewarding your business to an outsource supplier.

  1. The reputation and performance of the service of several 4PL businesses were considered for outsourcing – those two factors speak volumes for a business. For a non-biased source, we looked at publications that featured the top 4PL businesses in the United States.

  2. A top ten list was compiled from the publication based on the criteria that they provided for the service we were looking for. The criteria included storage, inventory management, shipping, and 3PL management.

  3. Request for information (RFI) and requests for quote (RFQ) were then submitted to the companies. Once received and reviewed for a harmonious match with the medical company, a top three were selected.

  4. Another more competitive RFQ was then asked from the final three.

  5. Once the final three RFQs were submitted, the final choice was announced to the suppliers. Then legal contracts and finance began to work on the final contract.

Risk analysis and cost/benefit of all the different suppliers throughout the decision-making process should also be key metrics to judge a supplier by, also, to make an informed decision.

The attributes that the supplier had that was awarded the warehousing business included the following:

1) lowest price for quality of services rendered,
2) great expertise,
3) great management of personnel, skilled employees and flex labor practices,
4) a high-quality and safe environment for both employees and their products and
5) constantly striving for continuous improvement and passing on proven cost savings throughout the contract to their customers.

Business owners who outsource discover that this smart business decision allows them to maximize their revenue and help build customer loyalty. Whether you would like to use it to cut costs, provide faster and better services, or boost profitability, you’ll find the benefits of outsourcing are undeniable. You should now be able outsource your business operations with a better conscience and the confidence that it can make your business operations run better, Now you can brush that pesky angel and demon off your shoulders!

tooawesomeSuccessful hiring takes the one thing small business owners have none of: time. But, hiring the perfect employee for your business will ultimately save you time because this new team member will share the workload and come up with new ideas. He or she will also make your business more profitable, and raise the quality of work of your entire team.

Still not convinced that you need to rethink how you hire? Consider the cost to your company to rehire when the first employee doesn’t work out. Some estimates put the cost to rehire at 30% of the employee’s annual salary and that is not money most small businesses have to burn. So why do so many of us find ourselves unsatisfied with a new hire?

The hiring process can be difficult because in most cases the job candidate is acting. Think of the traditional hiring process like a series of first dates – the candidates wear their best clothes, have thought about answers to all the typical questions (“What is your biggest flaw or weakness?”) and can usually put their best foot forward for a couple of hour-long meetings. The smooth answers you’ll receive are really no reflection on reality. The key to successful hiring is to get out of the first date  mode and find out what the candidate will be like after three or six months of cashing paychecks.

But finding someone who isn't first date perfect, who will commit themselves to the mission and vision of your business for years to come — now that's a time consuming task. But it’s not impossible and is well worth it in the long run. Here are some tips about finding the right employee for your small business.

Be Clear About What You Want

Once you’ve grown your business enough to hire another employee, it’s easy to put the hiring process on a fast track. You think, “If I could get someone started within a month, I’d finally be able to focus on researching our next product.” Not so fast.

You’re going to have to invest a lot of time up front before you even shake hands with the first candidate. Write a thorough job description that clearly spells out your requirements, no matter how specific. Is an advanced degree an absolute requirement? Name it.

Is there software the new hire must know? Include it. Being specific will help to weed out candidates early on and save you the time of going through hundreds of unqualified applications.

Also use this opportunity to explain your corporate culture so the candidate knows if they are a fit for the business environment you’ve created. Use this job description to formulate your job posting for the company’s website. This will be the online home base for information about the job, even though you’ll be posting it in other places as well.

Follow the example of companies like Bortek Industries. Their employment page is simple, transparent and employee-centered. They provide the basics, they're clear about what they offer, and they show a value and respect for the needs of their employees. If you can capture this same caring attitude, you'll find employees who value and respect your company culture as well. They're the employees you want.

Now it’s time to publicize this job opening. Word of mouth is key. Do you have another employee that just graduated from a highly ranked computer program? Tell him or her to spread the link to their classmates.

If your company has a social media presence, post the job opening on your Facebook and Twitter pages. Your social media followers are already connected to your mission. Is there a professional association for your field? Post with them as well. For example, PR professionals have local PRSA chapters that sponsor job listing boards or email lists.

LinkedIn is the go-to social media site for job seekers and employers. You can advertise your job there based on location, qualifications and more. Unlike a general listing on Craigslist or Indeed that will garner you hundreds (if not more) of applicants, targeted LinkedIn postings will attract candidates who are more likely to fit your needs.

These types of directed advertisements are more likely to help attract qualified candidates.

Who You Gonna Call?

You’re still in the beginning stages of the process, even if you received a stack of resumes within a week. First, read the materials closely. Immediately discard any with typos, missing information that you asked for in your job posting, or content so vague it clearly went to 50 different employers. Don’t waste your time.

A short phone conversation to prescreen applicants with strong resumes and cover letters can save a lot of time. But what should you ask them?

That depends on your business, but the authors of The New York Times best seller Freakonomics have an interesting idea. They recognized in their research that the inability for employees to say “I don’t know,” can really harm the bottom line, waste time and create unnecessary costs. Yet, in all of their work with businesses across the world, they’ve almost never encountered an employee willing to say “I don’t know.” In one example, the inability to concede those three words cost a business over $1 billion.

One of the authors, Stephen Dubner, put it this way, “Until you can admit what you don’t know, it’s virtually impossible to learn what you need to. Because if you think you already have all the answers, you won’t go looking for them. But let’s be clear: simply saying ‘I don’t know’ isn’t a solution. It’s just a first step. You have to figure out what you don’t know – and then work like a dog to learn.”

Think about asking a question related to your field for which the only real answer is “I don’t know.” Then see how the candidate responds. Do they own up to the fact it’s an unknown but offer ways to find a solution? If so, they are a problem solver who is willing to acknowledge where there is room for growth.

Also start to pay attention to whether this person would be a good fit for your culture. Are you a 9 to 5 workplace but you’re hearing a lot about flex time? Are they very formal and straight-laced in their tone, but your culture is casual and laid back? 

Finally, it’s not too early to start a salary conversation. Why bring in a candidate who is looking for double the budgeted amount? This round of interviews is all about funneling the best candidates to the in person interviews.

Pleasure to Meet You

By now, you’ve narrowed your list down to three to five top candidates, and if you think each is going to sit for a one hour interview, you’d be wrong.

Remember, putting time into the hiring process now will save you time and money later. So how should you conduct an in person interview?

First, have the candidate interact with all levels of staff. Instruct him or her to come through the lobby so that they meet the doorman. You can ask your administrative assistant to welcome them into your office waiting area. After the interview, return to both the doorman and your assistant and ask how they were treated by your candidate. A potential employee should be professional and kind with everyone they encounter, but you’d be surprised how many aren’t.

Your one-on-one interview should include well thought out questions, but remember that at this point, your candidate can still be in first date mode. So be creative and move beyond the typical questions. Instead, explain a scenario within your company and ask how the candidate would solve it. Tell them an anecdote that you’ve experienced – perhaps an unsatisfied customer or a shipping delay of a crucial component – and ask how they would respond. 

Also arrange for him or her to shadow someone with a similar job in your company. Have them spend a significant amount of time together, and then ask for your employees’ feedback. Make sure they are staying over lunch – another great time to observe how he or she is fitting in with your company culture.

Finally, don’t be shy about giving homework after your interview. If he or she will be writing, give a topic and ask for a sample press release within 12 hours. The writing samples handed in with his or her resume had been edited by his or her entire family – 12 hours won’t give enough time for that type of group effort and you’ll get a better sense of her work on deadline. 

Will your new employee be in charge of data management or financials? Give him or her a stack of sample invoices and ask them to input them into your system (set up a dummy account for him or her to use).  These types of tasks will move your candidate out of first date mode and give you a more realistic sense of their working style.

You’re Hired

After the interview, check his or her references and also check their social media presence. Would having your business’s name next to theirs make you proud or embarrassed? Is there something in his or her work history on LinkedIn that they didn’t reveal to you? Being savvy about social media will help you avoid a mis-hire.

There lots of tips and tricks to finding the right employee for your small business, but there is no silver bullet. As the movie The Internship hilariously pointed out, asking bizarre questions like, “You’re shrunken down the size of nickels and dropped into the bottom of a blender, what do you do?” will not find you the perfect candidate.

Instead, a solid investment of time and effort, along with the input of those already on your team, will ensure you hire the right person for your company.

Do you have any advice for small business owners looking to hire? Leave your recommendations in the comment section below.

 

AKA The Year in Review

As of January 1st, I, Seth Rasmussen, will have been a partner in this crazy business called Small Biz Triage for one year.  In April, Nate will celebrate 5 years of owning SBT.  Those aren't the only milestones we're celebrating.  See below for our year in review (2013 edition):

Brag board

So yeah, we kind of rocked 2013.  Much love due, of course, to our host of awesome clients who helped make 2013 one helluva year.  Thank you!

Here's to another year of helping small business owners, uncensored advice, and a unhealthy (says Nate) obsession with Doctor Who.  We've got some big plans for 2014, so stay tuned!

chimpLessons learned from over 200 Mailchimp campaigns

Yep, that's another milestone for the Small Biz triage team.  You may now uncork your champagne bottles. <pop!>

S'alright, enough bragging from me.  If you're looking for a quick rundown of some Mailchimp best practices for your small business, keep reading.  If you're looking for more in-depth answers, read on anyhow, and then schedule a quick (and free) one-hour training call.

Why Mailchimp?

Email is the highest converting form of digital marketing,  but only when done well.  We prefer Mailchimp because it helps us make the best email newsletters and campaigns possible.

From Name

Send it from the heart: use your own name, not some generic [email protected]  More personal = more opens, every time.

Subject Line

Copywriting 101: Combine <choose one: clever, funny, alliterative, off-the-wall, aggressive, deeply personal> with straightforward.  In other words, compelling enough to merit a click, but not so clever, funny, or off-the-wall that it's misleading.

Pre-Header

Most email programs will display this as the content preview after the subject line.  Your bonus opportunity to entice an open.  Rules for subject line apply.

P.S. Block

Optional, but an effective place for a "Reply to this email" call to action.

5039033938_c4fe55a0bf_m

Images

It's easy to embed images in a text block, but will make the mobile version look awful unless they're in between 270 and 285 pixels wide.  Usually you can ignore this issue by using the image cards in the drag and drop editor, which will resize the image for a mobile view.

Sidebar

If you want to entice more clicks with an array of content in your newsletter/campaign, the sidebar is where to put your links/images.  This keeps those links visible up and down the main body of the email, which increases the likelihood of a click.  Some templates in Mailchimp allow you to put content after the P.S. block, but nobody ever clicks down there.  Trust me.

Unsubscribe

The option to unsubscribe from an email list is required by law, so don't try to disguise it.  Why not embrace it?  Let the folks who don't care unsubscribe, and you'll be left with a better, more effective list.

Buttons/Links

Use link economy.  Focus only on links where you truly want the readers to click through and they'll have fewer distractions.  If you only have one link you want readers to click, make it a big ol' bright button to make it that much more obvious.  Use a variety of call's to action for your links to keep it fresh and interesting.

6971577682_3f39521af7_bDon't Be Lame

Epitomized by the vlog brother's DFTBA (don't forget to be awesome).  Boring content will either be ignored or deleted.

Stop Selling

The folks on your mailing list are already interested, so don't abuse that privilege.  Give them interesting things to explore.  make your content useful to them in some way.  Show, don't sell.

Scheduling

Early morning is a good time to send a campaign.  The odds of getting a prompt reply will be higher before lunch.  If you're on PST like me, that means you'll want to send it at 4:00 or 5:00 for your readers on the east coast.  The emails will still be there when us west coaster's wake up.  Pay attention to what days of the week your audience is more likely to open a campaign as well.  For some, it's mid week, for some: the weekend.  It really depends on your target market.  If you're an ecommerce site, you probably already know what day of the week is your biggest sales day, so send the campaign that morning.

A/B Testing

aka how we figure all this stuff out.  Create two versions of the same newsletter and see which one performs better.  Should we send our newsletter from [email protected] or [email protected]?  A/B split time, baby!  Do we get more clicks with a sidebar or with one column body/three column footer layout? A/B that stuff!  Remember to be scientific about it though: only adjust the thing you're trying to test.  If you're testing layouts and use different subject lines as well, all you data is meaningless.

Merge Taggin'

Merge tags are placeholders that will auto-fill with the data you have for each contact.  Example would be opening with |FNAME| tag that is replaced each recipients first name upon sending.  A fantastic way to personalize each email.  Just make sure to QC your merge tags so folks don't get emails that start with "Oh hi there, [email protected]"

That's all for now folks.  There's a lot of nuance to a well crafted campaign, so if you have further questions, why not schedule a free one-hour training call?

Preach What We Practice Series

This is the first installment of our new blog series, "Preach what we Practice" where we'll give fellow small business owners a back-stage pass to how we do business. This week I'll dig into our file management practices.

- Nate -


Confession time.

I used to HATE Google Drive. It was always missing that one feature that only Microsoft Word could handle. It also took some serious bandwidth for true real-time collaboration. And you needed a Google Account to access it.

All that's changed now - bandwidth isn't a problem anymore, its features cover about 90% of our requirements and who doesn't have a Google Account anymore. So we gave it another shot last year at the insistence of one of our more tech savvy clients, and are really digging it. Here's how we use it to make (and save) money.

What we use Google Drive for:

We use Google Docs for any document that will require internal or external collaboration. It's especially helpful for 'living documents' that are designed to be updated regularly like Editorial Calendars, checklists, or documents that will go through a ton of editing (such as a press release).

Recently Google Drive has become a more practical/cheaper option for storing static files, images in particular, but also PDFs, contacts, sponsor decks and one-pagers. The ability to save a document as a PDF means we can collaborate on a document, then save a PDF copy when the final draft is locked.

Additionally, we'll add URL's in our INTERNAL documents and tools for staff training. The browsing of Google Drive is clunky at best in the web interface, but some deliberate insertion of links can help improve usability and continuity.

What we *DON'T* use Google Drive for:

Raw storage of files such as website backups and plugins, we rely on Dropbox (which I'll cover tomorrow). I tried it out for awhile, but had issues when sharing docs with clients. While we may store images in Google Drive, extracting images that have been embedded in documents is a hassle, so we don't create final drafts of blog posts in Google Drive either.

Update (5/27/15): Recent changes to Google Drive have made managing image files and other static files much more practical, so we've edited the above sections accordingly.

Our file structure:

I use a fairly simple file structure, mirroring the same hierarchy I use in Dropbox at the Parent > Child level. This is especially important with my CLIENT folders which I share out constantly - makes it easier to share the folder than sharing individual files one-by-one. That way when I use the "Email Collaborators" feature, any document created in that folder is automatically shared with the client.

Take a look:

Google Drive File Structure

Our Google Drive File Structure


Google Drive Folders

Our Google Drive Folder Setup

File naming:

After slinging paperwork for 5-years in the Air Force, I came up with some "when I'm king" rules for naming files.

No Numbers. No Dates. Descriptive Titles.

In the age of search, and sorting by file property (i.e. sorting files by date modified) the need for a complicated file naming system is massive overkill.  I will append the client name on files as necessary, i.e. CLIENT NAME's - Editorial Calendar.

Styles:

Several years back a client sent us over a mysterious document called a "Brand Guide". Truthfully, the design aspects of marketing were very new to me back then. I was just learning the basics of insistence on whitespace and how to avoid going crazy with font libraries. That document was a god-send (and cost that client 5 figures), and gave me a glimpse in how the 'big boys' do it. Notably, injecting consistency into your documentation.

If it's a title, use this font, and this size, and this weight, and this spacing ... at first it seemed limiting, but building a good business habit of injecting consistency into your brand can only benefit.

Here's some screenshots of the custom styles I use for our documents plus a screenshot showing how to adjust your default styles:

Style Guide for Google Drive / Docs

Style Guide for Google Drive / Docs


Adjusting Styles in Google Drive (Docs)

Adjusting Styles in Google Drive (Docs)

Uncommon Uses:


UPDATE (5/27/15): Here's a few templates/checklists we've found work well with Google Drive's collaborative abilities. Help yourself!

Managing Split Payments on Projects - Now that we've "gone legit", we no longer use this template. During the years when Small Biz Triage was just a two man team with a rotating cast of freelance help, however, this document kept made tracking our income and expenses simple and let us know how much we could pay ourselves without bankrupting the company.

Editorial Calendar Template - Required resource for anyone who needs to stick to a publishing schedule, be that to promote live events, post blogs, send newsletters or manage crowdfunding campaigns. We do all of those, so we get a lot of mileage out of these. Seth likes to flip the calendar so the rows are weeks and the columns are platforms. If you want to know why, ask him.

Sales Pipeline Template - Another one from our leaner days. Not suitable for the size of our operation now, but extremely useful as a sanity aid for any lone wolf bootstrappers out there.

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