A Good Deal on a Bad Location is a Bad Deal

Of the many choices a business owner must make, aside from good hiring practices, the location of his business can be paramount to success.  Consider opening a high-end gift store for pets in an area that inhabits primarily low-income families.  Your landlord boasts of low rent which matches your business plan, but may contribute to a poor bottom line performance because the demographic and psychographic makeup of your customer base may not frequent your store.

Landlords typically offer Lease Agreements that are unilateral in nature and protect their interest at every step.  An entrepreneur, who is truly excited about the opportunity to start his business, often overlooks the small print of a Lease which can be devastating.  In order to secure an Agreement that is in the best interests of both parties to the Lease, it is advisable for a business owner to secure the services of a commercial real estate broker who lives in the area and is experienced with negotiating Lease Agreements.  This may preclude your wife’s best friend’s husband who says he is in commercial real estate.  Leasing or buying a property for your business can be complicated, long-term, and expensive.  BE SURE you carefully vet the broker/representative!

In my travels both in the US and in foreign countries, I marvel at the number of “Available” or “Going out of Business” signs that permeate the landscape of every community.  When I meet with clients who are struggling, they usually blame the economy; difficult employees; lack of capital; politics, and other factors as their nemesis.  In some instances, those excuses do have an impact on the performance; however, I seldom hear the owner proclaim that his rent is taking up too much of the overhead.  In fact, many big-box stores today are learning the hard way that location and housing costs are essential in the sales process.  Consider ACE Hardware who recently announced their efforts to cut the size of their space and move closer to their customer base near neighborhoods they serve.  Other examples include Best Buy, JC Penney and the “former” Circuit City.  Even though the economy may have impacted these companies, there are a number of their competitors who are thriving.   

I once had a client who signed a good-faith Agreement for a space that had an older HVAC unit.  The Lease started in the summer months and the Air Conditioning Unit worked very well.  Unfortunately, the Owner did not ask for information regarding the HVAC and assumed it was fine since the AC worked.  As colder weather approached, the need for heat was apparent but when the staff turned on the heat for the first time, there was none available.  Upon further review, it was learned that the heating unit had been disconnected during the lease term of the previous tenant.  The forecast for the next day was a high of 30 degrees.  The Lease indicated that the Owner was responsible for the HVAC maintenance so the owner had to pay for repairs to get the heating unit to work.  It was too late to negotiate.  To make matters worse, the HVAC had to be replaced several months later and guess who had to pay for the replacement?

 

For a list of other “lease deal breakers”, or “Lease concerns”, write me at gmoore@ceofocus.com.  Provide me with your name and pertinent contact information along with the type of business you are planning to open or are currently operating.  Your relationship with the Landlord is very important and it begins with a Lease Agreement that is mutually beneficial.

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What’s Your Dream?

Remember the Julia Roberts movie Pretty Woman, where the Happy Man shouts, “What’s your dream?” In the movie the Happy Man was referring to Hollywood-land of dreams.  When I think of, “What’s your dream?” I am thinking of your vision for your business.

Every business owner needs a vision, a big dream that creates a mental image of where you want your business to go. Simply put, the vision is where you want your business to be in the future.  Whatever your dream is, have you taken the time to write it down as clearly as you can to paint a picture for all to see?

The statement of your business vision should capture your passion and energize everyone in your operation- your team of employees, your business associates, and your clients or customers too.  Your vision consists of the company’s core values (the values you stand for) and what you “aspire to become, achieve, or create”.1

Core values are usually three to six words that describe who you are and what values or principles you have.  Here is the core values statement for one of the companies whose owner I coach.  “Integrity is at the heart of who we are and what we provide our clients.  Our passion drives us to strive for excellence; our goals compel us to be innovative; our commitment to our customers energizes us to provide exceptional service.”

Having your core values defined enables you to see where you want to go and in turn jump starts your vision for your business.  If you have not already done so, define your core values; then ask yourself, “What’s my dream?”   Now you can articulate your vision of where you want your business to go and what you want your business to achieve or create.  Only when you articulate your dream, your vision, by putting it in writing are you ready to set your goals and strategies in place to achieve those goals.

In order to crystallize your vision for your business, first it may be helpful to answer these questions:

In ten years where do I want my business to be? (Where are we headed?)

How will our services or products evolve? (What will we manufacture or what services will we provide to ensure continued growth?)

What will be the scope of our business; will it be defined geographically or unlimited (an online business, for example)

Who will be our customers or users?

After you answer these questions, you are ready to craft your vision.  Use the answers to these questions to provide clarity when you write your vision, then share it with your employees, customers, and business associates.  Just like the Happy Man in Pretty Woman energized the street when he shouted “What’s Your Dream?”,  you will energize those with whom you share your vision and you will have a clear focus for achieving your dream.

1Gillens and Porras; Harvard Business Review; September 1996

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Do You Have a Board?

Does your small business have a board?  What kind of board you ask?  A skateboard,  boogie board, snow board, bill board?  Of course, I am referring to a Board of Directors.

Most large companies have a Board of Directors and all publicly traded companies are required to have a Board of Directors who advise executive officers on matters including but not limited to executive pay; strategic planning; financial reporting; mergers and acquisitions; dividends; budget control, company personnel, etc.  The executive team and primarily the Chief Executive Officer of the company are accountable to the Board of Directors.  Typically a Board will consist of experienced businessmen of which no more than 50% are employed by the company.  The idea is that the Board should operate independently in order to maximize the returns for the company’s share owners and stakeholders.

Many small business owners cannot afford a formal Board of Directors; instead they benefit from having a set of trusted advisors by being part of a Peer Group.  Typically the Peer Group is comprised of a group of six to twelve small business owners from various industries who meet regularly to consider each other’s challenges and successes and to advise each other accordingly.  The Peer Group members function as each other’s Board of Directors by providing input to ensure desired outcomes and to hold each other accountable for the changes they agree to implement.  While the President or Owner of the company is not obligated to follow the suggestions made by the group, l have found that the synergy and respect that permeates the group setting is quite influential.

Imagine, if you will, a Peer Group of small business owners sharing and challenging each other to analyze and grow revenue, solve human resource challenges, embrace new marketing and social media ideas, etc.   Here are two actual examples of the benefit of the Board or Group’s insight and input in Peer Groups I have facilitated.   Harvey H. owns an electrical company and has just lost his highly productive and effective sales Manager, Justin, who has been Sales Manager for twelve years.  During that time the company’s sales have grown exponentially.  Harvey asked the Board to provide insight in the recruiting process to maximize his potential in finding the best fit for Justin’s replacement.

Monique S. owns an online custom order pet supply business.  Revenues in her business have declined consistently over the past year; Monique sought turnaround advice from the Board.

Each of the Peer Group or Board members brings a challenge to the meeting.  Together they utilize their knowledge and experience to provide feedback and advice.  The Peer Group facilitator keeps the Group on track to maximize productivity and results.  In Harvey’s situation the Board helped him identify the traits that have made Justin successful and provided feedback on tools to use in vetting his search.  With Monique, the Board analyzed her 2012 sales and marketing to determine if there was a correlation in the declining sales.  They determined that the drop began when Monique pulled back on her online advertising and retargeting campaign.  Monique agreed to rev up these marketing campaigns immediately.  One of the Board members offered to work with her on reenergizing her Social Media efforts.

Sometimes the answers are obvious; other times more research is needed outside the meeting time.  In any event small business owners who are part of a Peer Group find having trusted advisors or a Board of Directors increases their business success.  At the annual IFA convention in February, an executive with a senior care company shared that small business owners with whom he works, are part of a Peer Group and these owners increased their revenue 123% over a period of 12 to 18 months; those who added coaching with their Peer Group experienced increased revenues of 184%.

The power of a Peer Group is no small matter in the success of a small business.  By embracing advice from each other, (the Board), and being held accountable to the changes they agree to make, business owners agree that the best board is a Board of Directors.

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UPCOMING EVENTS

Peer Group Meetings

Peer Groups meet on the Third Wednesday and Thursday of each month.

If you are a business owner and would like to learn more about this dynamic opportunity, please email or call us today!

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