Missouri Small Business and Technology Development Centers Blog

Here at the Missouri Small Business and Technology Development Centers, we’’re ardent devotees of the Baldrige Criteria for Performance Excellence. It guides many of the programs and services we offer our clients, and we use the principles in our own organization as well. In fact, the standards for certification by our national association are based on those criteria.

The national Baldrige association is undergoing an evaluation of the criteria to find ways to incorporate more “lean” practices as a way to improve and simplify work and reduce waste. This can only result in better criteria.

However, I recently read a story about an organization attempting to implement more “lean” processes in their operations and taking it — perhaps — a bit too far. They took it to the restroom.

In an attempt to lean their facility, the company re-engineered the paper towel dispensing in their restrooms. Now, only a predetermined size towel is available, and the quality of the towel is so poor that it shreds before it can be pulled free of the dispenser. To have enough to actually dry one’s hands, the user has to attempt to pull more towels from the dispenser, but since they tend to shred, the dispenser is often jammed, resulting in the user having to reach up into a rather unsanitary dispenser to free the next small paper towel. Towel remnants litter the floor, and custodial staff spend more time un-jamming the dispenser and picking up the discards.

This is a case of process improvement going too far without assessing the needs of the user. Sometimes cheaper is not better. A cost savings in one area may create a cost overrun in another. The lesson for business owners is to accurately and thoroughly assess what your customers want and need before attempting to change things. Their needs should play an equally important role in your decision making as do cost, processes and systems.

A new study from The Nielsen Company in April of this year indicates that 22 percent of the time we all spend online is spent interacting through some form of social media. More specifically…

75 percent of all Internet users visit a social network or blog every time they go online — up 24 percent from last year.

The average Internet user spends 66 percent more time on those social media sites than she did a year ago. The April 2010 number is six hours; last April’s number was 3 ½ hours. Facebook is about to pass Google by in terms of online traffic. YouTube recently surpassed two billion — yes, billion with a B — views per day.

More details from the study that you might find interesting:

• Brazil has the largest percentage of Internet users visiting a social network — 86 percent.
• Australians spent 7 hours and 19 minutes on social networking sites in April — the greatest amount of time internationally.
• 75 percent of Italy’s online users visit Facebook regularly; the U.S. and the U.K. were in second place with 60 percent of users visiting the online giant.

Still think you don’t need to pay attention to social media for your business?

Talk to any entrepreneur, and you’ll get a different opinion on whether or not a business plan is important to a company’s success. When we ask our clients if they have business plans, we often hear, “Yes, I have one — in my head.” Often the idea of writing that down and putting some numbers and strategy behind it is a foreign concept. But would you start on a road trip to a new destination without a map?

According to small business lore, for every successful business WITH a business plan is an equally successful one with the plan in someone’s head. But that may not be reality.

Recently Palo Alto software did a survey (that was later independently validated by the University of Oregon Department of Economics) that asked thousands of users of their software about their businesses. One question concerned business planning. The responses indicate that companies with a written business plan were nearly twice as likely to successfully grow their businesses or obtain capital as those who did not write a plan.

To be more specific, 36 percent of the respondents who had written business plans were successful in securing a loan. Only 18 percent of those without a plan secured financing. 36 percent of the business plan writers secured investment capital; only 19 percent of the non-writers could say the same thing. Finally, 64 percent of the businesses with written plans had grown their businesses. Only 43 percent of those without a written business plan had experienced any growth.

Simply put, writing a business plan appears to be a critical component of small business success.

Which brings to mind something General Dwight Eisenhower said about the D-Day invasion: “The plan is worthless; planning is everything.”

We encourage clients to write business plans not so they can produce a nicely bound document. Our purpose in encouraging that is to ensure the client does the thinking that is necessary to start an ultimately successful business. Answering the questions necessary to create a solid plan is the only way to help ensure you have thought of all of the opportunities — and the challenges — inherent in starting your company.

Seems the research backs us up on that.

So Tony Hayward of BP wants his life back. Well, I suspect there are a lot of folks affected by the Gulf oil spill disaster who would echo that sentiment, including the 11 who lost their lives when the rig exploded, the hundreds, if not thousands, of families affected by loss of income and home and the other families and businesses down stream who will feel the effect of loss of wealth in the Gulf until the mess is cleaned up.

Like many others, I was ready to sign on with the “boycott BP” gang and drive by the stations (which I have historically favored) to reach the next fuel outlet. The more I investigated, however, the more I realized that I was letting my anger get in the way of my common sense. All BP stations are franchises. The owners are local folks who are about as far removed down the food chain from the oil disaster as their competitors are. They didn’t create this mess, and they are just as miserable about it as the rest of us. Now some of them are reporting that their sales are down, that former customers are stopping by not to purchase fuel, soda or donuts, but to tell someone to his face about how incensed they are about BP’s handling of the disaster. What those people are failing to realize is that the local franchise owner can do little to remedy the situation. Punishing him does not really punish BP. It simply punishes his employees, their families and the local economy. It creates ill will in the wrong place. And it really doesn’t teach Hayward and his top echelon team much at all since their profits last year were more than $15 billion. They really won’t feel it if I buy my gas from another station.

What we need to do is call for reform in the industry, elect the leaders who will hold people like Hayward accountable and find a way to assist in relief efforts. There will be time after the clean-up to deal with the real culprits. But the fellow trying to put his kid through college by running a BP station isn’t one of those. I’m sure some of them would get out of their agreement with BP if they could at this point. Unfortunately, if they have signed a 10-year commitment, they’re stuck, just like the wildlife in the slick. As someone who cares about small business and what it brings to the community, I don’t need to make things worse. I’m just trying to keep it in perspective.

In recognition of National Small Business Week, Dan Danner, president and CEO of the National Federation of Independent Business, released the following statement:
“New research from the Pew Research Center shows that 71 percent of Americans say small businesses have a positive effect on the way things are going in this country, more than any of the 13 sectors the group asked about. At the bottom of the list are large corporations (64 percent said negative), the federal government (65 percent), Congress (65 percent) and banks and financial institutions (69 percent negative).”

In a recent article in the Wilson Quarterly, Margaret Graham notes that two generations ago, folks like Steve Jobs and Bill Gates — entrepreneurs who built monolithic organizations — would have been viewed as marginal, even perhaps disreputable figures. Today, they are heroes of industry, having taken their entrepreneurial creativity to a new level in corporate America. They made the corporation entrepreneurial. Beneath the big umbrella that is Apple or Microsoft are hundreds of inter-relationships with small firms, creative units and enterprising individuals.

Could it be that the little guys have taught the big guys a thing or two? The fact is that all through history, it’s been the entrepreneurs who gave birth to the revolutionary ideas that revolutionized a nation. Think Thomas Edison and Henry Ford. Whereas the emphasis in that era was to grow big, create systems of mass production and take those innovations to an eager nation, the emphasis now is on agility, response to innovation and adapting to new market demands. The idea of entrepreneurship as a disruptive force has gone from a negative connotation to a positive one.

Regardless of the time, generation, economy or environment, whether they are viewed as villains or heroes, entrepreneurs have changed the course of history in more ways than we can fathom.

The news that IBM will be opening a technology support center here in central Missouri, creating more than 800 jobs with an average salary of $55,000 each, is certainly great news for our region. Mid-Missouri has a higher than historic unemployment rate, and many of those individuals are highly skilled workers who have lost well-paying positions due to plant closings, down-sizing, out-sourcing and the overall economic malais. We can only hope that they will find new opportunities with the big business soon to be our neighbor here in Boone County.

The even better news, at least from our perspective, is that this renewed earning power will enhance the spending power of mid-Missouri workers, and that’s great news for the area’s small businesses. As more disposable income enters our marketplace, we can also hope that it spawns healthier bottom lines for our region’s entrepreneurs. After all, it is these firms that give our community its color, diversity, fabric and interest — the qualities that attract a big concern like IBM in the first place and keep it here for the long haul.

Better days are here again — for all of us!!!

Some of the latest research from the Kauffman Foundation puts even more data behind what we have known for a long time: job growth comes from young, growing firms and that, if we want job growth, then we need to have more of those firms.

There are a variety of ways to encourage that kind of growth, but the answer is not always more money. Small businesses don’t necessarily need loans, but they do need more customers. They need more sales. Hence, they need new markets.

Markets come in three types: domestic, government and international. A conversation with some state agency partners was very revealing in terms of what the state can do to help reach new markets, in particular, international markets. The Office of Business and Community Services within the Missouri Department of Economic Development has a staff of international marketing experts that can literally hold a company’s hand through the international marketing process.

Following a detailed assessment of the company, its potential markets and potential partners, the folks at DED will work side by side with Missouri companies to find the best match in terms of distributors overseas. They can advise on negotiations, pricing, payment and all of the many facets and subtleties of doing business with overseas partners. They advocate for the company as experienced consultants on the side. While I knew this sort of assistance must exist somewhere, it wasn’t until they walked me through what they actually do that I realized the value this must have for Missouri companies seeking to export.

Want to know more? Visit www.missouridevelopment.org, or call them at 573/751-4855.

John Wanamaker owned Philadelphia’s first and largest department store. Starting as an errand boy in a small retail establishment, in 1876, at the age of 38, he purchased an old depot and transformed it into a shopping revolution. But I’m thinking of him today because of what he said about marketing:

“Half the money I spend on advertising is wasted. The trouble is, I don’t which half.”

It’s a sad truth that the nation’s business owners will spend millions of dollars each month on marketing that doesn’t work. But how do you know?

Ask yourself these questions:

• Do you know how many qualified sales leads you will get next month?
• Do you know how much a customer is worth over the course of his or her lifetime?
• Do you know how much it costs to acquire a customer?

The creative part of marketing has not changed since John Wanamaker opened his legendary department store. The technology has changed. The tools have changed. Instead of a call to action including a “Call now…” line, you will be directed to a website. But the key to marketing — a relationship with the customer — has not changed, and never will.

Regardless of the tools you use, you need to:

• Grab your customer’s attention. Someone once told me the best way to do that is to write headlines like those that appear on the cover of Cosmopolitan magazine. Look at one in the grocery check-out line next time, and you’ll see what I mean.
• Provide good information. Use your copy to agitate the problem your product or service solves, then explain how it will. Talk to them in terms of their need, not your product or service.
• Make the customer an offer that is too good to refuse. Just telling your customers to “Call for more information” is not good enough. Make them a concrete, specific offer.

Stay tuned here for more information on how to use these three tips to generate leads from a variety of marketing strategies.

According to a poll conducted by American Express, nearly half of small business owners plan to make capital investments in their businesses this spring. That’s up 6 percent over about six months ago. Nearly 28 percent plan to hire new staff, up from 23 percent last fall. Although in general entrepreneurs are not feeling overly positive about the economic situation, there are a few, represented in the increasing numbers above, who must be doing something right. Just what is that?

Seems it boils down to cash flow. Which includes getting paid faster. More than 56 percent of growing firms report they generate enough revenue to cover working capital needs, while 33 percent feel they are just staying afloat and another 13 percent believe they may be captaining a sinking ship.

The growing firms indicate that only a few customers are taking more time to pay. One reason for that is faster-growing firms likely have online payment capabilities, which makes everything easier — and faster.

The business and personal services sector seems to have weathered the downturn better than other sectors. The firms that are only holding their own or in decline are most likely in the retail sector and — no surprise — construction.

A good many companies — some 64 percent — said the difficult conditions in which they find themselves have forced them to examine processes, streamline operations and examine management practices. Many report that they have cut spending on marketing and sales. And, many hiring decisions have been put on hold while owners opt instead for part-time workers or contractors for specific project.

Facilitating cash flow and running a lean machine appear to be keys to sustainability. In reality, those are good practices — not just in a time of economic challenges, but always.

What do you and your colleagues talk about when you’re gathered waiting for a meeting to start? Or when you take a break to enjoy lunch together? Since we’re all business-oriented types in our shop, we usually talk about business. And most commonly, about marketing. And that often turns into discussions about current marketing campaigns.

Among our favorites right now are the E Trade babies and the Capital One Vikings. (This is not an endorsement of either company; we just agree that their advertising is memorable.)

But another has surfaced recently that is getting a lot of interest. Domino’s Pizza’s campaign, practically admitting their pizza has been lousy for a long time and promoting how they have changed it.

We agree it’s a bold strategy. But we disagree on whether or not the pizza is really better. It’s different, but it may not be better. There are two interesting themes about this. One is that Domino’s is not really known for taste, such as our locally owned pizza place, which is really hard to beat. It’s known for convenience. So have they gained anything by changing something for which they are not best known? Most of the people I know who buy Domino’s don’t do it for the taste. They do it because it’s fast, and they can feed the kids and get on to other things in a matter of minutes.

Another discussion surrounds what is actually catching our attention in their new ads. Is it that we really care about the changes they have made to the product itself, or is it that we are fascinated by a company freely admitting that they believe they have produced a sub-standard product for many years, and they are owning up to it? Are we really interested in the pizza or the fact that they are publicly beating themselves up?

Whatever the motivation, people are trying the new pizza. So, for the moment at least, Domino’s will likely see a spike in sales. It’s too soon to tell if it will allow them to capture more of the $15 billion in annual pizza sales nationwide. We’ll be watching to see what their next marketing strategy is after they have finished being hard on themselves. I don’t think we can watch that indefinitely.