Mine Your Own Business

Optimism Reigns Again?

The main office of Tacony Corporation is located in St. Louis, MO (well actually Fenton, MO) and as in many areas of the country it has been a long, cold, and ugly winter. As a side note, St. Louis is also know for changeable weather, we have a saying something to the effect that " if you don't like the weather in St. Louis, just wait ten minutes." I thought that saying was unique to St. Louis until I did a search using the phrase "St. Louis weather if you don't like it just wait a few minutes" and came up with a whole Web page of similar sayings. I think it may be true of other areas of the country, but I know it is true in St. Louis because we had an accumulating snow on Monday and it is currently 82 degrees on Thursday afternoon.

What does weather in St. Louis have to do with small business? When I came across an article in The Wall Street Journal reporting on increasing optimism by small business owners, I thought of a comparison between our long nasty winter, the Great Recession, and the coming spring (by the way the official first day of spring is this Sunday).

There is a great deal of encouraging information in the article. The National Federation of Independent Business's small business optimism index increased in February. The article also describes how hiring has made gains as well. There may even be a chance that businesses may be able to raise prices and that the prices will hold, in fact after a negative 4 per cent in January,  February posted a 5 percent increase. The thing that is really encouraging about that information is that it is the first positive reading in more than two years. Maybe the long, cold, ugly winter is finally over and spring has arrived at last.

 

Some Good Economic News

There was a recent article from Bloomberg with some good economic news for November. The article reports on a recent survey reporting that confidence among U.S. small businesses had risen to the highest level since the start of the Great Recession (at least that's what I call it). An interesting side note, if you Google Great Recession Wikipedia calls it the Financial Crisis of 2007-2010 - talk about a euphamism!

The survey results are reflected in the National Federation of Independent Business's optimism index that rose to 93.2. Read the whole article for details and if you like graphs there are three links to some that dramatically show the good news. The first is the link to the index described above. The second is the link to the survey results for consumer spending. Both of these links are near the beginning of the article. The third is the link to the Russell 2000 Index about half way through the article.

Guess what link in the article does not reflect such great improvement. If you guessed jobs you would be correct, of course. That link to the jobless rate is near the end of the article and while it does reflect some improvement, there is still a long way to go. Look for a follow up posting later when the December results are in. Hopefully the current trend will continue.

Local Results on Small Business Saturday

We've done several postings on Small Business Saturday on Mine Your Own Business and here is a final follow up to results of some small businesses in St. Louis. The results were very good for some upscale boutiques along Clayton Road in Ladue. Essential Elements and Wish both said sales were up compared to last year and they were among 13 Ladue retailers offering discounts throughout the day on December 18th.

Read all about how they varied their discounts throughout the day as an incentive to get shoppers in early. Also important to shoppers resulting in increased business was how an American Express $25 purchase at a locally owned small business resulted in a $25 credit on the shoppers next bill.  As the article says it's free money. The combination of the discounts and the free credit resulted in a nice increase in business for these small businesses and it was a pretty good deal for the smart shoppers as well.

Any Small Business Saturday Results?

We did two postings in November about Small Business Saturday,  a new promotion sponsored by American Express that enocuraged shoppers to purchase at local small businesses the Saturday following Thanksgiving. If you missed the posts on Mine Your Own Business and would like to read them, they were Small Business Saturday and Small Business Saturday Follow-Up. A recent article from the Wall Street Journal depicts how at least some small businesses did have some good results over the Black Friday Weekend and some were directly related to the new promotion.

The article concentrated on small businesses located on the main street in Ridgefield, Conn. There are three points I noted in the article.

• Some customers specifically mentioned they were shopping there because of the Small Business Saturday Promotion.
• Businesses in Ridgefield that experienced the greatest increase in traffic and business came up with some promotion to attract extra customers such as Books on the Common mentioned in the article.
• Book on the Common also extended their hours to match the Ridgefield annual Christmas tree lighting, increasing traffic and generating a 30% sales increase over the 2009  Friday after Thanksgiving.

Hopefully the Small Business Saturday will continue to grow over the years. Something to remember is Cyber Monday started up slowly, but according to an article from CNET sales were up this year over 16% from 2009.

Inflation Warning

If you believe that inflation is at our doorstep, read this to learn how to prepare. The author of this article is very concerned about possible upcoming government inflationary policiies and the posting provides some of the reasons for his concerns. He feels that inflation is especially rough on small businesses since they don't have some of the tools available for a larger business.

One fo the first recommendations in the article is to keep essential price increases small and frequent as opposed to larger, less frequent price increases. Here are a few more of the tips in the article that especially are applicable for small businesses.

• Continue to keep overhead low
• Watch your margins carefully
• Pay down variable interest loans as soon as possible.

The article provides more detail on these tips and a few more as well  The advice on keeping overhead low is something we mentioned last week in Mine Your Own Business in the posting Put Your Business on a Diet.

Put Your Business on a Diet

First a little background before we get to the main topic of this posting. Did you know the average American gains at least two pounds a year over their lifetime? I thought I remembered this depressing fact and then did a Google search and came up with this article. To add insult to injury, I've noticed as I get older that losing weight is a slow laborious process taking several days to a week to lose a pound or two, but one large meal can add a pound or more. Now to the main topic, there was a recent article that compared losing weight by dieting to controlling overhead in your business to keep it mean, lean, and profitable.

The article describes how overhead expenses are fixed costs that your business has every month regardless of sales, such as rent, leases, and salaries for your employees. It goes on to make the point that a business will get to break-even when the profit you make from sales covers your fixed expenses. Every time a business increases an overhead expense, increased sales are needed to reach the break-even point.

The final point was that many small businesses were forced to cut overhead just to stay in business. As in our dieting example in the first paragraph, it is a lot easier to rigorously control your overhead expenses on an ongoing basis rather than having to cut expenses. Think especially hard about large overhead expense increases just as you would avoid  large meals in order to control your weight.

Shopping Locally

Small businesses have had a particularly difficult time during the Great Recession (which is what a lot of people are calling it). We've posted frequently in Mine Your Own Business on many plans to encourage your customers to buy locally such as the 3/50 project. Now comes an article that takes it a step further. Not only does it suggest encouraging your customers to buy locally, it suggests you buy goods and services for your small business from fellow small business owners.

The article suggests several things that can be purchased for your small business from local stores instead of going to Wal-mart or some other outlets of big corporations, and I'm sure you can think of some additional things. The article concludes with a good point, by supporting other local small businesses you are indirectly supporting your own as well.

Two Views of the Unemployment Rate

There was a recent article titled Employee Retention Strategies that described how two main problems facing businesses during the recession are under-qualified people applying for positions and retaining your best employees. The article focuses most on the businesses keeping those valuable employees and gives four suggestions.

1. Give compensation where it is due.
2. Enforce an open desk policy.
3. Provide growth opportunities.
4. Be a flexible and transparent employer.

That is one view of the impact of the high employment rate on small businesses and certainly an absolutely valid one. There is another take though that this may be the time to look for new employees, either to replace marginal employees or to hire some bright new talent to improve your workforce. After all there are lots of very talented people unemployed so it might be a good opportunity to make some changes that will help your business in the future. We discussed this idea in Mine Your Own Business back in February in Employees and the Recession.  Unfortunately the high unemployment rate is still with us, so the posting is probably worth a look.

New Employee Training

As the economy starts to improve, most small businesses will eventually hire new employees as their business grows. It is crucial for the employee to be trained effectively both so the employee can grow in their job over time and to maximize their contribution to your business. So how do you accomplish this complicated and difficult task? Here is a great article that provides nine tips for training that new employee. While all the tips in the article are very good, five of them are especially applicable to a small business as opposed to a larger business or corporation. 

• Remind new employees why they were hired.
• Always explain "why".
• Blend in customer service.
• Encourage personality.
• Inspect what you expect.

Of the five points above, I thought two of them would be especially helpful in training new employees and were something I had never really considered before. The two points were Always explain "why", and Blend in customer service. The article makes the point that by combining job skills and customer service during the training process, there will never be any question in the employee's mind of which is more important.

One Dilemma Facing Small Businesses

As we've frequently covered in Mine Your Own Business, small businesses by their very nature face a number of challenges. Some we've covered are finding and keeping good employees,  customer service issues, increasing sales, effective pricing, getting new customers.....the list goes on and on. A large corporation has different departments and a larger budget to cover all these areas, whereas a small business owner usually has to handle all or most of them himself.

The Wall Street Journal had a recent article on a survey of 734 entrepreneurs that described one especially pressing dilemma. Nearly half of the business owners were having problems effectively marketing their companies in the current economic situation. The business owners were facing a Catch-22 in that when business is slow they need to increase spending for advertising and marketing but they have trouble finding the funds to do so.

The article goes on to describe several tactics that some small business owners have used to address this problem with a great deal of success. You can read the entire article for their very clever solutions and they may give you some ideas as well. One of the least expensive solutions used by many of the owners was something we've posted about as well, online resources and social media. Here's a link to one of our postings from earlier this year.